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AND 


Government  Control 


^.  cyY,  KiRKMAN 


•  iarrtiiiiV3i»itJ>ai 


THE  GIFT  OF 

MAY  TREAT  MORRISON 

IN  MEMORY  OF 

ALEXANDER  F  MORRISON 


RAILWAY  RATES 


GOVERNMENT    CONTROL, 


ECONOMIC     QUESTIONS    SUBROUNDING 
THESE    SUBJECTS. 


MARSHALL  M.    KIRKMAN. 


CHICAGO  AND  NEW  YORK: 

Rand,   McNally   &   Co.,    Publishees. 
1892. 


Entered,  according  to  Act  of  Congress,  in  the  year  1891,  by 

Rand,  McNally  &  Co., 

In  the  oflBce  of  the  Librarian  of  Congress,  at  Washington,  D.  C. 


PREFACE. 


The  object  of  every  intelligent,  honest,  and  patri- 
otic man  is  the  attainment  of  that  which  is  best. 
What  I  have  to  say  in  regard  to  railway  rates  and 
;  government  control  is  actuated  by  this  desire.  It  is 
based  on  what  is  practicable  and  true;  on  what  is 
attainable.  If  it  runs  counter  to  the  opinions  of  the 
public,  or  of  those  to  whom  the  public  looks  for 
information,  I  am  sorry.  I  do  not  write  from  the 
standpoint  of  the  railways,  but  from  that  of  an 
observer  and  student;  from  the  standpoint  of  one 
interested  in  the  prosperity  of  his  country,  and 
believing  in  the  intelligence  and  uprightness  of  his 
countrymen. 


433033 


CONTENTS, 


CHAPTER  PAGE 

I.  The  ethics  of  trade,  including  that  of  carriers.       7 

II.  Railway  rates — their  bases  and  the  influences 

affecting  them 13 

III.  Railway  rates — their  bases  and  the  influences 

affecting  them 37 

IV.  Railway  rates — their  bases  and  the  influences 

affecting  them 83 

V.  Railway  rates — discrimination — pools     ...     95 

VI.  Special  rates  and  their  relation  to  commerce     .  117 

VII.  Necessity  and  value  of  pools 129 

VIII.  Railway  rates  and  government  control.  Rates 
may  be  too  low,  they  can  not  be  too  high. 
Railway  enterprise.  Unnecessary  railroads 
— effect  thereof.  Proper  scope  of  govern- 
mental supervision 149 

IX.  Railway  rates  and  government  control.  Rail- 
way growth  in  the  United  States.  Present 
status.  Methods  of  railroads.  The  limits 
within  which  legislative  interference  is  valu- 
able       ■ 193 

X.  Value  of  private  ownership  and  interest.    Gov- 
ernment control — its  inadequacy     ....  ;i05 

(5) 


6  CONTENTS. 

CHAPTER  PAGE 

XI.  Government  supervision  and  control — its  limi- 
tations. The  value  of  private  ownership. 
Further  reference  to  rates — principles  under- 
lying them 215 

XII.  Government  control  versus  private  control. 
When  government  control  is  desirable;  when 
undesirable — its  tendencies 237 

XIII.  The  tenure  of  railroads  under  the  law.     The 

interstate  commerce  law  of  the  United 
States.  The  requirements  of  the  English 
law 253 

XIV.  Mutuality  of  interest  in  the  prosperity  of  rail- 

ways       273 

XV.  Cost  of  railroads  not    fully    capitalized — the 

reasons  why.    Effect  on  rates 281 

XVI.  Local  and  through  traffic — State  versus  inter- 
state. Impossibility  of  distinguishing  one 
from  the  other.     Effect  on  legislative  action.  295 

XVII.  Moderation  exercised  by  wise  governments  in 
meddling  with  the  rates  of  railways  and  in 
exercising  their  police  powers;  the  reasctns 
therefor.  The  status  of  railways  in  Eng- 
land, Canada,  Australia,  Germany,  France, 
Austria-Hungary,  Belgium,  Spain  and  Por- 
tugal, Italy,  Russia,  and  Japan     ....  303 

Index  to  authorities  quoted 337 

General  Index 341 


RAILWAY    RATES 


GOVERNMENT    CONTROL. 


CHAPTER    I. 

THE   ETHICS   OF  TKADE,    INCLUDING  THAT   OF 
CARRIERS. 

The  principles  that  govern  producers  and  manu- 
facturers generally,  govern  railroads.  But  the  lat- 
ter feel  more  quickly  than  other  property  any  fiscal 
disturbance,  because  they  are  nearer  the  people  than 
any  other  industry  ;  because  their  relations  are  more 
intimate ;  the  association  of  interest  stronger  and 
more  sensitive.  Reciprocally,  anything  that  in- 
jures the  business  or  credit  of  carriers,  injures 
other  industries. 

The  commercial  interests  of  a  people  are  indis- 
soluble. 

Anything  that  injures  one  class,  eventually  in- 
jures all.  The  source  from  which  the  injury  arises 
is  immaterial,  whether  from  unwise  legislation,  de- 
nial of  justice,  over  production,  imiDrovident  man- 
agement, or  failure  of  crops.    The  effect  is  the  same. 

(7) 


8  RAILWAY  RATES 

The  interests  Qi  tborralroad  comj)anies  and  the 
community  are  indistinguishable.  Their  objects  and 
aims  ai  6  the  .same.  ■  Ea-cli  is  necessary  to  the  other. 
Eacii  must  j)eri'orm  its  part.  They  are  mutually  con- 
cerned that  each  should  progress ;  that  each  should 
be  prosx)erous.  They  participate  in  each  other' s  j)ros- 
X)erity,  as  they  do  in  each  other's  misfortunes. 

The  greater  the  interest  that  is  stricken  down, 
the  greater  and  more  lasting  the  effect  on  surround- 
ing industries.  Witness  a  monetary  panic,  a  failure 
of  crops,  a  prolonged  strike,  a  disturbance  in  the 
value  of  land.  It  is  quite  as  marked  in  the  case 
of  railroads,  though  the  community  rarely,  if  ever, 
in  such  instance,  trace  the  cause  of  their  misfort- 
unes to  its  true  source.  The  prosperity  of  the  la- 
borer, merchant,  land  owner,  manufacturer,  and 
farmer,  can  only  be  temporary  if  railroads  are  un- 
remunerative.  One  class  can  not  successfully  prey 
upon  another. 

Capital  is  exacting;  its  requirements  cannot  be 
evaded.  Without  its  confidence,  improvements  can 
not  be  made,  and  those  in  existence  languish  and 
die.  In  commercial  affairs,  enterprises  widely  sepa- 
rated and  seemingly  having  no  connection,  wait  on 
each  other's  prosperity.  An  attack  upon  one 
recoils  upon  the  other.  The  bond  of  sympathy  is 
complete. 

Interference  with  trade  destroys  its  equilibrium, 
its  natural  adjustment,  and  this  is  as  necessary  to 
its  proper  fruition  as  the  equal  distribution  of  the 
forces  of  nature  is  necessary  to  their  harmonious 
action. 


AND  GOVERNMENT  CONTROL.  9 

The  commerce  of  the  world  adjusts  itself  accord- 
ing to  natural  laws.  Any  interference  with  these 
laws  superinduces  artificial  action,  and  injures  and 
retards  trade.  There  are  no  exceptions  to  this  rule. 
Particular  interests  cannot  be  separated  from  others. 
Thus  railways  cannot  be  singled  out.  They  must 
be  allowed  to  prosecute  their  affairs  in  accordance 
with  the  economic  laws  that  govern  such  properties. 
The  disasters  that  follow  refusal  to  recognize  these 
laws  will  not  be  offset,  as  we  might  hope,  by  temx:)0- 
rary  successes.  They  will  occasion  injury,  through 
the  mistrust  they  will  engender,  long  after  the  inci- 
dents themselves  have  been  forgotten. 

Commercial  and  social  prosperity  go  hand  in 
hand.  The  former  is  necessary  to  the  latter.  Rec- 
ognition of  natural  laws,  of  equity,  of  the  rights  of 
labor,  of  moral  obligation,  and  of  the  duty  we  owe 
society,  is  necessary  to  success  in  commercial  affairs. 
It  is  bound  up  in  the  success  of  railroads. 

Trade  must  be  allowed  to  work  out  its  destiny,  to 
accomj)lish  its  ends  in  its  own  way,  in  accordance 
with  its  environment  and  in  harmony  therewith. 
We  can  not  put  it  in  a  strait-jacket.  This  is  true 
of  railways,  of  farming,  of  the  manufacture  and 
sale  of  iron.  A  change  in  i)rices,  say  in  the  rates  of 
railways,  can  not  be  brought  about  arbitrarily  with- 
out subsequent  injury,  any  more  than  we  can 
bring  about  a  change  in  the  price  of  farm  products 
at  will. 

Railways  are  based  on  the  needs  of  the  world. 
They  are  a  necessary  of  life.  They  require  to  be 
untrammeled  to  attain  their  maximum  usefulness, 


10  BAIL  WAT  BATES 

just  as  farming  requires  to  be  untrammeled.  Noth- 
ing but  harm  can  come  from  interference  with  their 
affairs.  Their  environment,  the  action  of  commer- 
cial and  social  usages  and  needs,  will  secure  their 
equitable  management. 

Governmental  regulations  in  harmony  with  these 
conditions  may  be  enforced  without  harm.      No  • 
others  can. 

The  railway  interest,  by  its  greatness  and  benefi- 
cence, merits  our  esteem.  It  answers  a  universal 
want.  It  is  an  integral  part  of  our  being,  of  our 
social  and  commercial  system.  It  must  conform  to 
our  jDeculiarities  in  its  government  and  affairs.  This 
it  will  freely  do,  if  left  untrammeled,  but  not  other- 
wise. 

Raih'oads  are  not  different  from  other  trades  that 
respond  to  general  needs.  They  are  self-adjustive. 
They  are  governed  by  what  we  may  term  God's 
natural  laws — the  laws  of  trade,  universal,  adapta- 
ble, and  just.  All  other  laws  are  limited  or  acci- 
dental in  their  application. 

In  every  business  definite  knowledge  of  the  influ- 
ences likely  to  operate  for  or  against  an  enterprise 
is  necessary  to  its  greatest  x^ros^^erity.  Until  these 
can  be  ascertained,  the  enterprise  languishes.  This 
being  the  case,  we  can  estimate  the  injury  that  may 
be  done  a  community  (though  quite  likely  without  its 
being  cognizant  of  the  fact)  by  ill-considered  legisla- 
tion affecting  great  business  enterprises  like  railways; 
by  denying  them  protection;  by  se^Darating  them 
from  other  industries;  by  throwing  around  them  an 
air  of  mystery  and  uncertainty.    A  community  may 


AND  GOVERNMENT  CONTROL.  11 

do  the  same  thing  by  fostering  a  belief  that  the 
owners  and  managers  of  railways  are  more  selfish 
than  other  men,  less  efficient,  less  patriotic,  less 
honest;  by  interfering  arbitrarily  in  their  aifairs;  by 
seeking  to  make  them  subservient  to  other  influ- 
ences; by  confiscating  their  revenues,  wholly  or  par- 
tially, through  enforced  reduction  of  rates,  or  other 
measures.  And  yet  this  is  exactly  what  is  being 
done  to-day,  more  or  less  actively,  in  every  quarter 
of  the  world,  but  more  particularly  and  especially 
in  the  United  States.  In  every  direction  the  igno- 
rant, fussy,  idle,  and  vicious  are  stirring  up  strife, 
creating  distrust. 

Assimilation  and  distribution  are  coincident  in 
commercial  affairs.  Thus,  the  collection  of  the  reve- 
nue of  a  railroad  and  its  disbursement  are  simul- 
taneous acts.  In  many  cases  the  revenue  is  expended 
in  advance  of  its  being  gathered.  The  receipts  from 
merchants  and  others  for  trans^Dortation  services  do 
not  remain  in  the  vaults  of  the  carrier,  but  pass 
back  without  sensible  interlude  into  the  possession 
of  the  persons  from  whom  received.  The  i)roceeds 
of  the  check  given  by  the  grocer  or  hardware  mer- 
chant for  the  carriage  of  his  goods,  he  receives  back 
directly,  with  its  accretions,  through  the  medium  of 
purchases  made  by  the  carrier,  or  those  directly  or 
indirectly  dependent  ui^on  him. 

The  remunerative  revenue  of  railroads  is  largely 
disbursed  in  improving  the  property  or  adding  to  it. 
No  portion  is  hoarded  or  lost.  It  passes  without  a 
moment's  delay  into  the  circulation  of  the  world, 
giving  employment  to  men  and  adding  to  their  field 


12  RAILWAY  RATES. 

of  usefulness.  It  is  estimated  that  the  direct  outlay 
of  railways  for  labor  is  thirty-eight  per  cent,  of 
their  gross  earnings.  This  amount,  therefore,  is  at 
once  returned  to  the  community.  Twenty-six  per 
cent,  is  returned  for  taxes  and  supx)lies.  A  part 
is  paid  out  in  interest,  a  part  for  dividends  and  for 
the  improvement  of  the  property.  Both  interest  and 
dividends  find  their  way  without  delay  into  useful 
circulation;  a  j)art  goes  to  pay  for  labor,  and  the 
necessaries  and  comforts  of  life;  the  balance  is  used 
to  start  new  enterprises  or  develop  old  ones.  No 
portion  is  lost.  The  community  derives  benefit  to 
the  utmost  farthing. 

This  much  by  way  of  preface  to  a  more  minute 
consideration  of  the  question  of  railway  rates  and 
government  control. 


CHAPTER    II. 

RAILWAY    RATES  —  THEIR    BASES,    AND    THE    INFLU- 
ENCES   AFFECTING    THEM. 

Public  injustice  is  the  result  of  misapprehension — 
rarely,  if  ever,  of  criminal  intent;  it  originates  in 
ignorance.  The  injustice  railways  have  suffered  in 
the  United  States,  at  the  hands  of  the  people,  has 
been  due  to  a  lack  of  knowledge  of  the  principles 
that  govern  carriers.  Tlie  owners  of  railways  are 
largely  to  blame  for  this.  Many  of  them  know 
little  about  political  economy,  and,  while  they  have 
conformed  to  its  laws,  have  not  recognized  its  pres- 
ence in  their  work.  It  is  a  common  belief  of  the 
public,  that  all  that  is  necessary  to  make  a  rate  is 
the  disposition  —  that  it  may  be  put  up  or  down  at 
will.  This  is  not  true.  Rates  are  governed  by  in- 
fluences beyond  the  control  of  the  carrier.  Some 
of  these  influences  I  propose  to  notice. 

Those  who  have  charge  of  the  traffic  of  railroads 
must  conform  in  all  they  do  to  the  laws  governing 
commercial  affairs;  otherwise  their  work  would  be 
fruitless.  They  are  practical  economists.  While 
they  may  not  have  studied  political  economy,  they 
are  yet  thoroughly  versed  in  its  subtleties,  so  far  as 
relates  to  their  business.  They  may  not  understand 
the  theory;  but  they  understand  its  bearings,  and 
conform  thereto  in  everything  they  do. 

(13) 


14  RAILWAY  BATES 

The  rates  charged  by  carriers  affect  the  cost  of 
everything  we  use.  They  appeal  especially  to  the 
producer  and  consumer.  Each  sees  that  the  amount 
is  added  to  the  cost.  The  subject  is,  therefore,  one 
of  universal  interest.  Each  day  adds  to  its  gravity. 
It  is  a  favorite  theme  with  those  who  wish  to  catch 
the  public  ear — to  pose  as  reformers.  The  effort  to 
make  the  masses  believe  that,  through  legislative 
action,  they  may  arbitrarily  regulate  the  affairs  of 
railroads,  without  detriment  to  themselves,  has  been 
persistent  and  adroit.  The  idea  sought  to  be  con- 
veyed is,  that  railroads  are  something  apart;  that 
their  traffic  is  not  governed  by  laws  known  to  reg- 
ulate other  commercial  transactions — to  fix  the  price 
of  other  commodities.  The  credence  these  misrepre- 
sentations have  met  with  encourages  those  who 
utter  them  to  pursue  the  subject.  The  outcome  can 
not  be  foretold.  Railways,  like  other  institutions, 
are  capable  of  withstanding  a  certain  amount  of 
pressure — a  pressure  equal  to  their  reserve.  Then 
they  collapse.  The  subject  is  one  of  the  greatest 
importance,  and  worthy  of  careful  examination — of 
honest  and  intelligent  action. 

The  rates  of  railways  are  governed  by  the  same 
laws  that  fix  the  price  of  other  necessaries  of  life. 
There  are  no  exceptions  to  the  rule.  We  can  no 
more  change  them  arbitrarily,  than  we  can  the  price 
of  fish  or  flour.  The  same  principles  govern  in  each 
case. 

In  considering  the  question  of  railway  rates,  one 
of  the  first  questions  asked  is :  What  is  a  reasonable 
rate '(    What  may  be  a  reasonable  rate  in  one  section 


AND  GOVERNMENT  CONTROL.  15 

or  country  may  not  be  in  another.  The  question  is 
purely  a  local  one.  It  can  not  be  generalized  or 
made  to  fit  any  formula.  It  is  a  practical,  not  a  the- 
oretical, question.  There  is  nothing  ideal  about  it. 
In  the  enunciation  of  theories  regarding  rates, 
the  fact  that  particular  railroads  are  intended  to 
serve  particular  districts  is  oftentimes  overlooked, 
and  an  attempt  made  to  make  them  conform  to  the 
interests  of  the  country  as  a  whole.  This,  ])V2iQ,ii- 
cally,  is  the  confiscation  of  private  property  to  the 
general  public — the  robbery  of  individuals  and  com- 
munities to  benefit  other  individuals  and  communi- 
ties. It  is  wrong,  unnecessary,  and  indefensible. 
Generally  speaking,  reasonable  rates  are  such  as 
enable  carriers  to  furnish  the  accommodation  the 
communities  they  serve  require;  to  keep  their 
property  in  repair;  to  pay  necessary  expenses;  to 
make  a  reasonable  return  on  the  capital  invested. 
The  last  named  governs  only  qualifiedly,  however. 
The  question  is  a  practical  one.* 


*"To  determine  whether  a  rate  is  reasonable  it  is  necessary,  in 
every  instance,  to  go  beyond  the  single  article  and  consider  the  whole 
subject  of  classification  and  the  whole  business  of  the  carrier  under 
it.  To  challenge  the  charge  for  the  carriage  of  a  single  article  is  to 
challenge  to  some  extent  the  whole  rate  sheet,  and  calls  for  careful 
consideration  of  the  question  whether  the  rate  to  be  charged  to  the 
one  article  is  out  of  just  proportion,  when  all  the  circumstances  and 
conditions  which  the  railway  officers  must  be  supposed  to  have  had 
in  mind  in  making  the  classification  and  the  rating  arc  considered. 
If  policy  or  necessity  requires  the  giving  of  unprofitable 
rates  as  to  one  article,  compensation  is  expected  to  be  made  by  a 
proper  adjustment  of  charges  in  respect  to  others.  ...  A  rate 
imposed  upon  any  article  of  commerce  may  affect  rates  in  distant 
parts  of  the  country,  so  that  an  intelligent  consideration  of  the  sub- 


16  RAILWAY  RATES 

So  far  as  the  use  of  meclianical  ai^pliances  is 
concerned,  common  carriers  are  not  different  from 
other  peoj)le.  Their  revenues  are  wisely  disbursed. 
When  these  revenues  fall  below  reasonable  require- 
ments, iDroperties  deteriorate  and  companies  become 
bankrupt.  The  community  suffers  in  both  cases, 
''The  people  want  good  railroad  service,  and  they 
ought  to  have  it  at  fair  rates;  but  to  give  them  this, 
it  is  needful  that  the  road  be  kept  in  good  condition 
and  well  equipjDed;  that  the  trains  be  sufficiently 
manned  and  well  handled;  that  competent  servants 
be  employed  and  fairly  x^aid,  and  that  the  company 
avail  itself  of  all  new  aj^pliances  which  are  cal- 
culated to  make  the  service  more  speedy,  more 
convenient,  or  more  safe.  Good  service  and  un- 
reasonably low  rates  are  antagonistic  ideas;  if  the 
latter  are  insisted  upon,  the  former  is  not  to  be 


ject  will  require  study  of  the  railroad  situation  in  every  part  of  the 
land.  .  .  .  Relative  charges  between  any  one  article  of  com- 
merce, and  the  others  which  the  carrier  transports,  are  made  from 
considerations  of  policy  and  in  the  discretion  of  the  carrier,  so  that 
a  rate  may  be,  if  considered  by  itself,  unreasonably  low  or  unrea- 
sonably high.  .  .  .  Railroads,  in  the  matter  of  rates,  can  not  be 
considered  singly.  When  a  road,  favorably  situated,  charges  but 
reasonable  rates  for  its  own  service,  it  may  be  impossible  for  a  rival 
road,  which  was  built  perhaps  without  any  sufficient  demand  for  it, 
or  which  is  unfavorably  situated  for  successful  competition,  to  main- 
tain such  rates  as  will  give  to  it  a  corresponding  return  upon  the 
investment.  It  will  be  compelled  to  measure  its  rates  by  its  more 
fortunate  rival,  whether  its  .stocldiolders  receive  returns  u[)on  their 
investment  or  not,  for  reasonable  rates  to  the  one  may  determine 
what  the  other  shall  receive,  notwithstanding  anything  the  manage- 
ment can  do  or  that  can  be  done  for  it  by  the  public  authorities." 
— "Fourth  Annual  Report,  Interstate  Commerce  Commission," 
pages  16,  17,  20,  28. 


AND  GOVERNMENT  CONTROL.  17 

expected.  Many  times  in  railroad  history  it  has 
been  found,  on  inquiring  into  the  cause  of  some  great 
railway  calamity,  that  it  was  due  to  the  fact  that 
some  bridge  had  become  weak,  some  tunnel  was 
insufficiently  guarded,  some  machinery  defective, 
or  some  employe  incompetent  or  wanting  in  vigi- 
lance because  of  overwork.  If  the  road  was  pros- 
perous, the  management  would  thus  be  shown  to  be 
inexcusable,  2:>erhaps  criminal;  but,  if  the  road  was 
not  prosperous,  and  for  some  reason  the  manage- 
ment had  been  forced  to  make  such  rates  as  would 
not  give  the  necessary  revenue  for  a  safer  service, 
the  blame  for  such  a  calamity  maj^  be  fairly  subject 
to  apportionment.  The  public  can  never  be  in  the 
wrong  in  demanding  good  service  when  fair  rates 
are  conceded;  and  an  enlightened  public  sentiment 
will  never  object  to  fair  rates,  when  it  is  understood 
that  good  service  is  conditional  upon  them."  * 

The  rate  influences  the  cost  of  railroads  and  the 
outlay  for  ox^erating.f  It  also  affects  the  accommo- 
dation. 

It  is  never  designed  to  invest  more  in  a  railroad 
than  its  traffic  will  yield  a  return  upon.  Accommo- 
dations conform  to  the  price  paid  therefor. 

If  prox)erties  are  not  remunerative,  capital  will 
no  longer  seek  such  investment.  That  already 
placed  will  shrink  in  value.  This  shrinkage  entails 
hardshii:)  both  on  the  owner  and  the  community. 
It  is,  however,  unavoidable  when  not  precipitated 
by  governmental  interference. 

*"  Second  Report,  Interstate  Commerce  Commission,"  page  23. 
f  When  I  speak  of  operating  expenses,  I  mean,  genenilly,  working 
expenses,  taxes,  and  cost  of  maintenance. 
2 


18  BAILWAT  RATES 

In  practice,  carriers  oftentimes  find  it  expedient 
to  do  business  that  barely  covers  cost  of  operating. 
This  is  so  when  maintenance  of  organization  needed 
in  other  directions  is  sustained  thereby.  Such  in- 
stances are  rare,  however.  Except  in  cases  of  rate 
wars,  business  is  not  done  that  does  not  pay  a  mar- 
gin of  profit  over  cost  of  operating. 

Wliile  rates  must  be  generally  remunerative,  they 
can  not  be  uniformly  so.  They  are  the  result  of 
innumerable  conditions,  compromises,  and  adjust- 
ments. The  first  tariff  was  constructed  as  a  child 
builds  a  highway  of  blocks.  It  did  not  remain 
unaltered  an  hour.  It  was  found  that  the  traffic 
determined  the  rate,  and  not  the  traffic  manager. 
His  action  was  mechanical.  He  was  merely  carry- 
ing out  a  law. 

The  rate  must  be  such  as  to  stimulate  the  effort  of 
every  party  in  interest.  The  moment  it  does  not, 
business  ceases.  There  must  be  present  or  prosjject- 
ive  gain  in  every  case.  To  determine  whether  a  rate 
is  reasonable  or  not,  we  must  take  the  business  of  a 
carrier  as  a  whole.  If  his  gross  profits  are  not  un- 
reasonable, particular  rates  are  not  unreasonable. 

The  rates  of  a  railroad  are  the  outcome  of  natural 
causes.  There  is  nothing  artificial  about  them  ;  the 
flow  of  water,  the  movement  of  the  clouds,  the 
reverberation  of  thunder,  the  falling  of  rain,  the 
warmth  of  the  sun,  are  not  more  natural.  They 
grow  out  of  the  action  of  men,  are  based  on  their 
needs,  on  the  worth  of  the  thing  handled.  The 
process  is  extremely  sim^jle,  but  because  of  its  vary- 
ing conditions  is  not  generally  understood.    An  able 


AND  GOVERNMENT  CONTROL.  19 

and  fluent  writer  has  written  a  book  to  make  it 
apj)ear  that  the  transportation  system  is  artificial, 
and  is  carried  on  mainly  by  ignorant,  grasjDing,  and 
rascally  railway  owners  and  managers.  *  He  assumes 
rates  are  based  on  cost,  and  craves  legislative  inter- 
ference because  like  service  is  not  charged  a  like 
price.  He  says  the  i3ublic  "demand  that  the  same 
method  of  determining  the  cost  of  transportation 
shall  apply  to  all  classes  alike,  and  that  railway 
managers  must  not  have  one  standard  for  such 
freights  as  they  wish  to  favor,  and  a  higher  one  for 
those  whicli  they  desire  to  burden.  That  all  the 
services  of  the  railways  shall  be  ]3erformed  with  im- 
partiality, and  at  charges  based  on  the  same  stand- 
ard of  cost."  t  Underlying  all  he  says  is  the  studied 
effort  to  make  it  appear  that  carriers  are  interested 
in  favoring  particular  industries  ;  in  breaking  down 
others.  Nothing  can  be  further  from  the  truth. 
They  are  absolutely  impartial.  He  particularly 
deprecates  special  rates  and  the  ox^portunities  they 
afforded  shippers.  He  devotes  many  condemnatory 
pages  to  special  instances  of  wrong-doing,  among 
others  to  the  case  of  the  Standard  Oil  Company.:}: 
The  benefits  this  great  aggregation  of  capital  has 


*  J.  F.  Hudson,  "The  Railways  and  the  Republic." 
f  His  arguments  are  fanatical  and  misleading.  His  basis  of  rates 
would  exclude  from  the  markets  of  the  world  the  cheap  beef  and 
grain  of  remote  districts,  because  they  cannot  pay  the  same  rate  per 
ton  per  mile  for  one  thousand  miles,  that  local  producers  can  pay  for 
fifty  miles. 

X  A  corporation  controlling  the  bulk  of  the  output  of  oil  in  Ohio 
and  Pennsylvania. 


20  RAILWAY  BATES 

conferred  on  the  community,  he  adroitly  ignores. 
The  fact  that  sixty  millions  of  people  are  able  to  buy 
their  oil  to-day  for  one-half  what  they  would,  except 
for  its  enterprise,  sagacity,  and  economical  methods, 
he  passes  by  in  silence.  The  merging  in  it  of  in- 
numerable petty  producers,  and  the  avoidance  there- 
by of  expenses  for  services,  rents,  agents,  commis- 
sions, and  kindred  outlays,  he  ignores,  or  esteems  a 
commercial  crime.  He  would  have  had  the  govern- 
ment keejD  each  little  trader  alive  ;  have  compelled 
the  people  to  support  them,  notwithstanding  com- 
petitive influences  amply  protect  them  from  arbi- 
trary exactions  in  other  ways.  It  is  apparent 
from  results  that  the  industry  referred  to  has  been 
managed  throughout  by  sagacious  and  prudential 
men,  and  that  the  people  have  been  greatly  benefited 
thereby.  Government  interference  at  any  time 
would  have  been  unwise.  It  \\  ould  have  kept  alive 
myriads  of  middlemen,  a  dead  load  fastened  on  the 
back  of  the  people.  The  benefits  attained  are  not 
lessened  by  the  fact  that  men  claim  great  wrong 
has  been  done.  In  the  good  accomplished  we  see 
the  difference  between  theory  and  i^ractice ;  between 
sense  and  foolishness.  There  was  no  wrong.  It  was 
purely  imaginary.  There  was  no  oppression.  A 
few  sharp  traders  were  overreached  by  other  sharp 
traders.  That  is  one  of  the  incidents  of  trade,  and 
out  of  it  good  arises.  It  eliminates  the  drones.  The 
community  is  benefited.  And  so  it  has  been  gener- 
ally with  all  the  practices  of  railroads.* 

*  I  bring  up  the  case  of  the  Standard  Oil  Company  here,  and  thus 
prominently,  because  k  is  cited  in  the  United  States  as  the  most 


AND  GOVERNMENT  CONTROL.  31 

If  every  sin  attributed  to  railroads  were  true,  all 
tlieir  shortcomings  would  be  but  as  a  grain  of  sand 
in  the  sea,  a  star  in  the  sky,  compared  to  the  good 
their  unrestricted  management  has  conferred  u^Don 
our  people.  I  use  the  word  unrestricted  advisedly. 
Railway  owners  are  not  different  from  other  traders. 
They  conform  to  tlieir  surroundings.  Their  methods 
are  the  same  as  those  who  haul  by  water.  The  rates 
they  charge  adapt  themselves  to  the  law  of  supply 
and  demand  as  naturally  as  does  the  price  of  corn. 

The  rates  of  railroads  can  not  be  the  same  from 
month  to  month,  or  year  to  year,  any  more  than 
they  can  be  by  water.  They  are  the  center  of  con- 
flicting interests,  of  incessant  fluctuations.  Those 
who  advocate  legislative  interference  would  change 
all  this.  They  would  substitute  for  this  natural 
world  an  artificial  one,  a  world  filled  with  block 
houses,  wooden  horses,  impossible  men,  impracti- 
cable theories.  They  would  sweep  away  that  which 
is  good  because  evil  has  attended  it;  would  make 
the  government  the  instigator  of  commercial  enter- 
prise, rather  than  business  men;   substitute  auto- 


glaring  instance  known  of  railway  discrimination  and  injustice.  The 
country  has  rung  for  years  with  condemnatory  speeches,  editorials, 
and  enactments  based  thereon.  If,  however,  all  that  has  been  said 
were  true,  it  would  only  be  an  exception,  an  isolated  instance,  some- 
thing special,  and  not  by  any  means  sufficient  ground  upon  which  to 
predicate  wholesale  warfare  upon  carriers.  As  a  matter  of  fact, 
however,  the  action  of  the  railways  in  connection  with  the  Standard 
Oil  Company  was  involuntarj^  unavoidable,  and  natural;  was  such 
as  the  necessities  of  business  required,  and  the  needs  of  the  com- 
munity demanded.  Their  action  was  not  predicated  upon  a  desire 
to  please  the  Standard  Oil  Company  or  benefit  it,  but  upon  the  neces- 
sities of  the  case. 


22  MAILWAY  BATES 

matic  action  for  genius.  When  they  have  achieved 
this,  they  "look  to  see  the  great  xjrinciple  of  com- 
petition work  so  freely  that  wikl  fluctuations  of 
freight  rates,  the  injustice  of  special  rates,  the 
restrictive  influence  of  pools,  or  the  creation  of 
inonoi)olies,  and  the  crushing  out  of  independent 
industries  by  discriminations,  become  as  impos- 
sible on  the  railways  as  it  is  upon  our  lakes,  rivers, 
and  canals. ' '  *  The  picture  is  beautiful,  but  mislead- 
ing. The  so-called  evils  are  really  blessings,  and 
attend  transportation  by  water  quite  as  much  as  by 
land.  They  are  the  natural  tools  of  commerce,  are 
such  as  facilitate  trade,  and  should  be  fostered  and 
encouraged,  not  condemned,  f 

Every  kind  of  competition  in  trade  is  beneficial. 
That  of  carriers  is  no  exception.  Particular  proper- 
ties or  neighborhoods  may  momentarily  suffer,  but 
the  result  will,  on  the  whole,  be  good. 

The  money  that  active  competition  loosens  is  not 
wasted,  albeit  suj)erficial  lookers-on  esteem  it  so.  It 
sets  in  motion  forces  imj)0ssible  to  animate  in  any 
other  way.  The  x)erfection  of  the  railroad  system 
of  the  United  States  is  due  to  it.  Managed  arbi- 
trarily by  a  single  man,  or  by  the  government,  it 
would  not  be  what  it  is.  It  would  be  tyrannical,  in- 
adequate, and  inefiicient. 

The  wastage  of  competition  is  only  apparent.     It 

*  J.  F.  Hudson,  "  The  Railways  and  the  Republic,"  page  23. 

f  I  use  the  terms  "commerce"  and  "trade"  in  a  general  way. 
They  imply  buying  and  selling,  bargaining,  the  effort  to  make  money, 
the  interchange  of  products  and  conmiodities,  and  include  all  the 
agencies  incident  thereto,  such  as  transportation  and  warehousing. 


AJVD  GOVERNMENT  CONTROL.  23 

is  returned  tenfold  in  the  intense  activity  of  men,  in 
multiplied  interest,  broadened  intelligence,  new  in- 
ventions, new  industries,  increased  trade,  increased 
consumption,  cheapened  processes.  This  is  what 
active  rivalry  between  our  railroads  has  brouglit  us. 
The  future  holds  out  equal  promises,  but  condi- 
tioned upon  our  allowing  the  capital  invested  in 
railroads  to  manage  its  own  affairs  in  its  own  way, 
conformably,  as  heretofore,  to  the  greatest  good  to 
the  greatest  number. 

The  relatively  small  profits  that  carriers  realize  on 
competitive  traffic  (discriminating  business,  so- 
called),  is  thus  measurably  offset  by  its  stimulating 
effect.  The  smallness  of  these  profits  is  explained 
by  the  fact  that  they  must  be  shared  with  the  ship- 
per. Mutuality  of  interest  is  present  here,  as  it  is 
everywhere  else.  Its  operation  is  as  unchangeable 
as  cause  and  effect.  While  the  fruits  of  competi- 
tion are  wholesome,  its  jDrocesses  are  curious, 
oftentimes  apparently  absurd.* 

Wise  saws  and  instances,  actual  and  hypothetical. 


_*  Thus,  Mr.  Hudson  thinks  it  extremely  ridiculous  that  iron 
should  be  shipped  from  Pittsburgh  to  Xew  York,  to  be  there  re-ship- 
ped through  Pittsburgh  to  points  in  Texas,  the  object  in  shipping  to 
New  York  being  to  get  the  benefit  of  the  competitive  rate  by  water 
from  there  to  the  Texas  coast.  Just  as  if  the  shipper  in  Pittsburgh 
could  expect  to  get  the  benefit  of  the  New  York  rate  unless  he 
is  on  the  ground!  Can  sophistry  or  legislation  put  Pittsburgh  on 
the  same  footing  with  New  York,  so  far  as  the  advantages  that  the 
latter  enjoys  from  transportation  by  water  along  the  coast  are  con- 
cerned ?  Manifestly  not.  The  advantage  is  a  natural,  indisputa- 
ble, inalienable  one,  and  one  that  can  not  be  corrected  by  extra- 
neous action  without  endangering  the  whole  commercial  edifice. 


24  RAILWAY  RATES 

have  not  been  wanting  to  demonstrate  how  opi^ress- 
ive  and  unjust  railroads  are.  They  are,  however, 
generally  fallacious.  The  methods  of  railroads,  if 
not  interfered  with,  are  wise,  far-seeing,  and  such  as 
to  build  up  the  internal  commerce  of  a  country. 
Instances  of  venal,  arbitrary,  and  foolish  acts  upon 
the  part  of  particular  men  prove  nothing.  We 
might,  with  equal  wisdom,  condemn  civil  liberty 
because  public  servants  are  sometimes  venal.* 

An  effective  means  of  crippling  railroads  is  to 
deny  them  power  to  protect  their  interests  and 
the  interests  of  those  who  look  to  them  for  trans- 
portation. The  author  quoted  above  would  not 
permit  them  to  do  business,  unless  the  rate  they 
received  therefor  was  uniform  in  every  instance. 
Thus,  industries  (among  them  farming  remote  from 
market),  that  could  not  afford  to  jpay  the  highest 
rate  would  die  out.  The  carrier  now  keeps  them 
alive  by  assuming  a  portion  of  their  burdens.  Mill- 
ions of  industries  are  thus  carried  on.  It  is,  how- 
ever, discrimination.  That  baleful  word !  That 
scarecrow  of  theorists  and  knaves ! 

Where  a  iDroducer  can  not  pay  the  maximum 
rate,  the  carrier  aids  him  if  he  can.  The  effect 
is  to  stimulate  competitive  markets ;  to  cheapen 
the  cost  of  the  necessaries  of  life.  Countries  are 
thus  built  up  and  enriched.  Each  industry  pays 
what  it  can,  without  reference  to  what  other  indus- 
tries pay. 

*  Moreover,  is  it  probable  that  the  servants  of  the  government  would 
be  more  honest,  more  impartial,  more  efficient  than  railway  managers 
are?    Nothing  in  the  history  of  the  world  warrants  such  belief. 


AND  GOVERNMENT  CONTROL.  25 

Nor  is  it  a  valid  objection  to  a  special  rate  that 
it  is  not  generally  known  ;  that  it  is  secured  by  a 
l^articular  merchant.  The  fault  is  not  the  car- 
rier's, and  if,  by  aiding  his  customer,  he  creates 
a  new  industry,  both  he  and  the  community  are 
benefited.  Railways  can  not  make  men  equal. 
The  shrewd,  experienced,  and  energetic  business 
man  must  not  be  handicai)ped  because  his  dull 
and  plodding  brother  possesses  neither  ingenuity 
nor  foresight.  Nor  can  his  methods  justly  be  made 
common  property,  to  be  heralded  broadcast  for  the 
benefit  of  others  less  capable.  I  do  not  consider 
worthy  of  notice  the  statements  and  innuendoes 
that  carriers  have  been  in  collusion  with  shippers  in 
connection  with  the  use  of  special  rates.  There 
undoubtedly  have  been  instances  of  that  character, 
but  they  are  unworthy  of  notice,  except  to  brand  as 
dishonest  those  who  have  been  guilty.  To  change 
our  system  of  commercial  x^ractice,  because  of  such 
instances,  is  as  foolish  as  to  deprecate  rain,  because 
the  crops  of  individuals  here  and  there  have  been 
ruined  thereby.  Trade  of  every  kind  abounds  in 
special  instances.  It  is  creative.  It  is  built  up  of 
wise  discriminations.  Railways  are  not  an  excep- 
tion. Uniformity,  here  as  elsewhere,  is  the  shield 
of  mediocrity,  the  refuge  of  the  ignorant,  stupid, 
and  lazy. 

It  would  be  imx^ossible  to  enumerate  the  instances 
that  call  for  the  special  intervention  of  carriers. 
They  come  into  play  wherever  a  mutual  benefit  may 
be  derived  therefrom.  The  business  of  railroads 
is    dependent    upon    the    patron    being  benefited. 


26  RAILWAY  BATES 

Thus  it  is  self-corrective.  The  occasions  of  special 
rates  are  infinite.  Thus  a  special  rate  may  be  given 
by  a  railroad  in  consideration  of  the  shi^^per  for- 
warding nothing  by  water ;  of  giving  it  his  whole 
business.  Such  an  arrangement  is  natural  and 
legitimate  ;  of  general  utility.  It  has  been  instanced 
as  oj)]3ressive.  It  is  directly  the  reverse.  It  adds 
to  the  business  and  the  profits  of  the  carrier,  and 
incidentally  redounds  to  the  benefit  of  other  patrons. 
It  is  also  sometimes  expedient  to  reduce  rates,  in 
order  to  move  a  crop,  or  the  traffic  of  a  place  or  dis- 
trict, at  a  particular  time,  just  as  a  prudent  mer- 
chant reduces  the  j)rice  of  his  goods  for  a  few  days 
to  clear  his  shelves.  It  is  impossible  to  enumerate 
the  instances  that  call  for  special  intervention.  Tliey 
will  occur  to  the  reader.  They  are  as  countless  as 
the  incidents  of  trade.  The  enemies  of  railroads 
refer  to  them  to  strengthen  their  case.  They,  how- 
ever, x)rove  nothing.  If  attentively  examined,  they 
will  be  found  to  be  based  on  good  business  usage, 
and  to  be,  on  the  whole,  beneficial.  It  does  not 
strengthen  the  arguments  of  unfriendly  critics,  that 
instances  are  not  wanting  where  railway  managers 
have  been  ignorant,  dishonest,  and  foolish  ;  where 
they  have  made  a  dishonest  use  of  special  rates. 
The  acts  of  railroad  managers,  as  a  whole,  have  been 
wise  and  salutary,  in  harmony  with  those  about 
them,  answering  the  wants  of  the  country,  fostering 
and  extending  its  trade. 

The  making  of  a  low  rate  never  has  the  effect 
to  raise  another  rate.  Each  is  independent  and 
co-existent ;  a  unit  of  the  service.     The  act  of  rais- 


AND  GOVERNMENT  CONTROL.  27 

ing  or  lowering  is  the  result  of  cause ;  of  commer- 
cial necessity,  not  of  chance  or  caprice.  A  rate 
can  not  be  raised  without  cause  any  more  than 
we  can  break  a  link  in  a  chain  without  ruining  its 
strength. 

Public  opinion  has  never  made  a  rate  either 
higher  or  lower,  any  more  than  it  has  changed  the 
price  of  potatoes.  The  reason  is  because  it  is 
based  on  natural  laws.  Many  traffic  managers 
may,  it  is  possible,  believe  that  they  are  potent  in 
such  matters.  But  this  only  shows  how  ignorant 
a  man  may  be,  and  still  perform  a  duty  creditably. 
Public  opinion  is  useful  in  enlightening  the  minds 
of  such  men;  but  to  assume  that  it  attracts  or 
diverts  trade,  or  lightens  its  physical  burdens,  is 
absurd. 

Wherever  commerce  is  remunerative  and  men  are 
free,  it  will  be  carried  on.  When  greatly  extended, 
it  requires  the  cooiDeration  of  many,  among  others, 
carriers.  This  means  a  division  of  the  profits.  Each 
gets  his  share.  The  division  is  the  result  of  com- 
promise—  mutual  adjustment.  It  is  the  duty  of 
the  government  to  protect  all  the  parties  in  interest. 
To  except  the  carrier  is  to  cripj)le  his  usefulness. 
If  left  free,  he  will  perform  his  part ;  otherwise  not. 

It  is  a  great  mistake  to  supi)ose  the  country  has 
been  benefited,  or  will  be  benefited,  by  laws  re- 
stricting the  freedom  of  railways.  The  people  may 
think  so,  just  as  they  used  to  think  the  burning 
of  our  grandmothers  at  Salem  benefited  them.  The 
task  of  disabusing  their  minds  from  such  delusions 
is  a  laborious  and  thankless  one.     As  soon  may  we 


38  BAIL  WAT  RATES 

hope  to  purify  water  by  damming  it,  as  to  build 
up  the  internal  commerce  of  a  country  by  placing 
restrictions  upon  it.  Every  restriction  placed  on 
railroads  cripples,  to  the  extent  it  is  enforced,  the 
industries  of  a  country.* 

To  restrict  the  right  of  carriers  to  change  their 
rates  at  will,  is  like  entrusting  one's  breathing 
apparatus  to  the  will  of  another.  The  commerce 
of  a  country  thus  hampered  can  not  be  healthy  and 
vigorous.  The  carrier  must  be  in  constant  and 
familiar  touch  witli  markets  and  the  local  and 
general  needs  of  business,  and  must  be  able  to 
respond  to  them  instantly,  otherwise  opportunity 
will  be  lost  and  business  die  from  lack  of  attention 
and  encouragement. 

The  belief  that  carriers  may  use  the  power  to 
make  rates  to  oppress  others,  is  absurd.  They  are 
the  creatures  of  circumstances.  They  originate 
nothing,  and  their  prosperity  depends  upon  their 
conforming  quickly  and  accurately  to  the  needs  and 
equities  of  business. 

The  evils  that  attend  railway  management  are 
ever  in  process  of  extinguishment,  because  they 
antagonize  the  interests  of  others  and  minimize  the 
usefulness  and  profitableness  of  such  properties. 
The  management  of  railroads  is  neither  blind, 
dumb,  nor  brutish.     It  is  instinct  with  life,  at  once 


*  General  supervisory  and  judicial  powers,  such  as  those  belong- 
ing to  the  Interstate  Commerce  Commission  of  the  United  States 
or  the  Board  of  Trade  of  England,  may  be  both  wise  and  salutary, 
if  the  law  under  which  they  are  exercised  is  not  oppressive.  The 
law  in  the  United  States  is  oppressive  in  many  respects,  but  the 
Commission  referred  to  is  not  responsible  for  this. 


AND  GOVERNMENT  CONTROL.  29 

kindly  and  complaisant,  because  its  welfare  is  insep- 
arably bound  up  with  those  it  serves. 

The  sins  and  shortcomings  of  carriers  are  those 
common  to  merchants,  bankers,  manufacturers,  and 
farmers.  They  are  not  criminal.  They  are  not 
such  as  to  merit  special  mention  or  reprobation. 
Wherever  harmful,  they  will  be  corrected  much 
more  effectively  without  legislative  interference 
than  with  it.  However,  I  do  not  by  any  means 
wish  to  say  that  they  should  be  overlooked.  Criti- 
cism is  beneficial  here  as  elsewhere.  It  is  like  a 
lash  across  the  back  of  a  lazy  horse.  It  enlivens, 
but  let  it  be  intelligent  and  temperate — such  as  the 
case  requires.  Let  us  not  damn  them  as  a  class, 
because  of  isolated  instances  of  wrong,  any  more 
than  we  damn  farmers  as  a  whole,  because  one 
farmer  seeks  to  repudiate  his  debts,  or  has  been 
caught  stealing  his  neighbor's  oats.  Above  all,  let 
us  not  mix  up  ignorance,  jealousy,  and  hatred  with 
our  justice. 

The  era  of  railways  precipitates  new  conditions. 
These  are  not  yet  fully  understood.  They  affect 
governments  as  well  as  individuals.  The  constitu- 
tions of  the  last  century  are  thought  by  many  not 
to  be  able  to  cope  with  our  gigantic  interests,  our 
concentrated  efforts,  and  intense  activity.  If  that  is 
so,  let  us  remodel  them  so  that  they  will  conform 
to  our  needs,  rather  than  the  needs  of  our  grand- 
fathers. If  the  central  government  is  not  strong 
enough,  let  us  add  to  its  strength;  let  us  make  its 
constituency  represent  a  higher  ideal;  let  us  make 
its  civil  service  more  industrious,  intelligent,  and 


30  HAIL  WAY  RATES 

honest;  its  Judgeships  a  life  tenure,  to  be  filled  by 
conscientious  men.  Every  railway  owner,  employe, 
and  manager  will  applaud,  in  common  with  others, 
such  a  resolve,  and  will  aid  in  every  possible  way 
to  bring  it  about.  They  are  all  interested  in  a 
stable,  wise,  and  beneficent  government.  There  is 
no  antagonism  here.  They  are  as  one  with  the 
community. 

A  prime  factor  in  determining  the  rates  carriers 
charge,  is  the  value  of  the  service  to  the  shipi^er. 
This  is  the  basis  of  remuneration  for  labor  in  every 
field  of  industry.  Any  other  would  be  oppressive, 
if  not  prohibitory.  Its  operation  involves  the 
exercise  of  discrimination.  But  discrimination  is 
the  instinct  of  trade,  its  intelligent,  directing,  and 
governing  force.  The  ignorant,  the  vicious,  and 
the  superficial  sj)eak  of  it,  when  exercised  by  rail- 
roads, as  something  oppressive,  something  to  be 
discountenanced.  This  is  because  they  do  not  con- 
sider the  analogies  of  trade,  or  its  methods.  The 
charge  of  carriers  can  not  be  disproportionate  to  the 
thing  handled.  If  more  is  charged  than  I  can 
reasonably  pay,  it  i^rohibits  me  from  doing  business; 
but  if  I  am  charged  what  I  can  aft'ord,  I  am  not 
treated  unjustly,  so  long  as  the  general  profits  of  the 
seller  are  not  unreasonable.  It  is  not  an  act  of 
injustice  to  me  that  a  carrier  charges  a  higher  rate 
for  my  blooded  horse  than  for  my  neighbor's  mule, 
although  they  both  occujDy  the  same  sjDace.  I  can 
not  afford  to  pay  the  same  rate  for  the  brick  used  in 
the  construction  of  my  house  that  I  can  for  the  car- 
pets that  cover  its  floors.     Rates  are  based  on  dis- 


AND  GOVERNMENT  CONTROL.  31 

criminations  of  this  kind,  at  once  practicable, 
necessary,  and  wise. 

Value  is  also  the  basis  of  discriminations  between 
places.  Thus,  the  numerous  land  and  water  routes 
between  Chicago  and  the  seaboard  render  the  serv- 
ice of  the  carrier  less  valuable  than  it  otherwise 
would  be.  It  is  a  fact  in  political  economy  that 
competition  lessens  value.  If  such  rates,  therefore, 
are  low,  they  have  merely  adjusted  themselves  to 
this  well-known  law.  The  carrier  must,  under  such 
circumstances,  take  less.  To  prohibit  him  from 
doing  so,  will  only  be  to  enhance  the  x^rofits  of  the 
water  carrier,  without  lessening  the  burden  else- 
where. 

Any  business  a  carrier  can  get  that  affords  him 
a  i)rofit,  however  small,  hel^DS  him  to  that  extent 
to  accommodate  other  interests.  It  does  not 
matter  how  this  x^i'ofit  arises,  whether  from  con- 
cessions to  a  weak  and  struggling  manufactory,  or  a 
city  where  competition  between  carriers  is  active. 
In  either  case,  the  rate  is  a  special  one. 

Rates  must  at  least  equal  the  cost  of  operating 
and  maintenance.  They  ought  also  to  render  a 
reasonable  return  on  the  original  investment.  How 
the  amount  shall  be  divided,  how  apportioned,  is 
governed  by  economic  laws  that  we  must  acquiesce  in 
but  can  not  govern.  The  adjustment  is  a  natural 
one,  based  on  the  values  of  the  things  handled,  and 
is  governed  by  recii)rocal  interests.  It  is  as  unneces- 
sary to  say  that  railway  rates  shall  be  reasonable,  as 
it  is  to  say  that  men  shall  not  drink  when  they  are 
not  thirsty.     Rates  conform,  like  every  other  par- 


32  BAIL  WA  r  RA  TE8 

ticular  of  business,  to  their  environment.  Tliey  are 
an  incident  merely;  a  link  in  a  long  chain.  Any- 
thing abnormal  that  attends  their  operation,  is 
corrected  as  quickly  and  as  surely  as  abnormal 
action  is  corrected  in  other  fields  of  industry. 

A  city  on  a  highway  is  better  off  than  one  that 
is  not.  So,  a  city  located  at  the  junction  of  two  or 
more  highways,  is  better  off  than  one  by  the  way- 
side. It  is,  to  a  certain  extent,  a  competitive  point, 
and  in  commercial  affairs  every  competitive  point  is 
more  or  less  a  p>oint  of  distribution.  Because  of 
this,  it  is  especially  advantageous  to  the  country 
round  about.  The  value  of  what  it  has  to  sell  is 
increased,  while  the  value  of  what  it  has  to  buy  is 
lessened.  The  advantage  is  a  natural  one.  It  affects 
the  traffic  of  the  carrier  and  modifies  his  practices. 
It  i^revents  uniformity  of  rate.  But  this  does  not 
matter.     No  one  is  harmed. 

A  uniform  rate  is  a  delusion,  the  Utopia  of  theo- 
rists, the  hiding- i^lace  of  those  who  seek  through  it 
to  destroy  or  confiscate  the  capital  of  others.  It  is 
the  delusion  of  dreamers  and  the  weaj^on  of  their 
less  honest  brothers.  Rates  are  governed  by  the 
markets  of  the  world.  Commerce  reaches  its  desti- 
nation by  the  most  advantageous  route.  "Trade 
seeks  the  easiest  path  from  the  producer  to  the 
consumer.  The  history  of  a  hundred  generations 
shows  great  cities  which  have  grown  rich,  and 
powerful  along  the  line,  or  at  the  termini,  of  some 
great  transportation  interest,  sinking  into  decay 
and  ruin  when  a  nearer  or  easier  route  is  discov- 
ered.   Commerce,  like  water,  seeks  the  lowest  level. 


AND  GOVERNMENT  CONTROL.  33 

It  rebels  at  unnatural  restrictions.  Temporary 
obstructions  may  be  put  in  its  way,  Just  as  one 
may  dam  a  stream,  but  sooner  or  later,  over  tlie 
dam  or  through  its  ruins,  the  stream  will  find  its 
natural  channel."  * 

Extraneous  causes  influence  rates  where  tlie  com- 
petition is  wholly  between  railroads.  They  also 
influence  competition  between  water  and  land  car- 
riage. In  the  latter  case,  competition  is  further 
enhanced  in  value  to  the  community  by  the  excep- 
tionally cheap  facilities  of  water  transportation. 
Betvv^een  Chicago  and  New  York,  the  water  routes 
determine  the  rate  of  the  railroads  for  six  or  seven 
months  of  the  year,  as  much  as  the  x)rice  of  sugar  in 
one  store  is  determined  by  the  price  in  another 
store.  Nor  is  the  effect  of  competition  confined  to 
the  prescribed  limits  of  the  particular  routes  over 
which  it  operates.  It  affects,  directly  and  indi- 
rectly, every  collateral  route  and  interest.  Tlius, 
"whenever  rates  are  reduced  on  account  of  the 
opening  of  navigation  from  Chicago  and  the  lake 
ports,  the  same  reduction  is  made  from  all  interior 
cities,  not  only  from  New  York,  where  the  canal 
runs,  but  to  Boston,  Philadelphia,  and  Baltimore. 
Although  the  latter  cities  have  no  direct  water  com- 
munication with  the  West,  yet  they  receive  the  ben- 
efit, as  far  as  low  railroad  rates  are  concerned,  to  the 
same  extent  as  if  a  canal  were  actually  running  from 
the  lakes  direct  to  those  cities,  because  whenever 
rates  from  Chicago  to  New  York  are  reduced,  it 
becomes  absolutely  necessary  to  reduce  correspond- 


"  George  11.  Lewis. 
3 


34  BAIL  WAT  RATES 

ingly  the  rates  from  Chicago  to  Boston,  Philadel- 
i:)hia,  and  Baltimore;  otherwise  these  cities  could  do 
no  business,  as  it  would  all  go  to  New  York.  The 
reduction  of  the  rates  from  Chicago  and  St,  Louis 
to  New  York,  Baltimore,  etc.,  reduces  the  rates 
from  Western  x^oints  via  New  York,  Baltimore,  and 
ocean  to  the  Southern  Atlantic  points.  .  .  The 
railroads  running  directly  from  Chicago  and  St. 
Louis,  via  Louisville,  Nashville,  and  Chattanooga, 
to  the  same  points,  are  obliged  to  follow  the  reduc- 
tions made  via  the  rail  and  ocean  routes.  .  .  The 
same  is  true  in  relation  to  the  west-bound  traffic."  '^ 

In  considering  the  influence  of  water  routes  on 
railway  rates,  it  may  be  said  that  shij)pers  will 
never  in  any  case  forward  by  rail  wholly,  unless  it 
is  to  their  advantage;  unless  the  benefit  is  greater 
than  to  ship  by  water.  There  can  be  no  coercion 
about  it.  Herein  lies  one  of  the  advantages  derived 
from  water  routes  to  shippers.  It  also  enables  them 
to  secure  concessions  outside  the  limit  of  water  area 
not  otherwise  attainable.  The  compulsion  is  not 
put  on  the  shipper,  but  on  the  carrier.  In  order  to 
secure  a  part,  he  must  make  concessions  on  the 
whole.  This  is,  to  the  community,  the  most 
effective  and  valuable  competition  of  all. 

Without  comj)etition,  every  man  would  be  at  the 
mercy  of  his  neighbor.  Competition  is  the  life  of 
trade;  its  balance  wheel — protecting  and  shielding 
all  alike.     It  is  to  be  encouraged.     It  should  be 


*  Letter,  Albert  Fink,  Commissioner  Associated  Trunk  Lines,  to 
Senator  Windom,  Chairman  Committee  of  tlie  United  States  Senate 
on  Transportation  Routes  to  the  Seaboard. 


AND  GOVERNMENT  CONTROL.  35 

unrestricted.  Tlie  clash  of  contending  influences, 
the  strife  of  rival  interests,  should  be  given  full  play. 
Their  effect  is  to  better  and  to  cheapen.  Unre- 
stricted competition  is  the  greatest  blessing  a  people 
can  possess.  Mr.  George  L.  Lansing,  who  has 
given  the  subject  of  traffic  considerable  study,  says 
that  the  effect  of  competition  is  to  bear  most 
strongly  on  those  things  in  which  there  is  the 
greatest  trade.  Thus,  the  smallest  margin  of  profit, 
over  the  cost  of  production,  is  on  the  necessaries  of 
life;  the  next  smallest  on  the  common  comforts,  and 
the  largest  on  the  luxuries.  This  effect  is  not 
caused  by  design.  It  results  from  the  oi)eration  of 
natural  laws  of  trade.  The  operations  of  the  same 
laws  produce  the  same  effect  on  the  rates  of  trans- 
portation. We  find,  as  a  rule,  the  lowest  rates  on 
the  j)roducts  of  the  farm,  coal,  wood,  petroleum, 
iron,  and  lumber,  etc.  The  forces  of  competition, 
which  tend  to  reduce  the  rates  of  transportation, 
cooperate  in  i^roducing  discrimination  in  favor  of 
those  things  which  are  moved  in  the  largest  quanti- 
ties, and  which  are,  of  course,  consumed  in  the 
largest  amounts.  The  aim  of  the  carrier  is  to  secure 
the  traffic.  To  do  this,  he  must  make  low  rates  on 
cheap  commodities.  This  results  in  distributing 
the  charge  for  transportation  wdiere  it  is  most  easily 
borne.  Not  only  do  necessaries  have  low  rates, 
relatively,  but  necessaries  consumed  in  the  largest 
quantities  have  lower  rates  than  those  consumed  in 
smaller  quantities. 

These  practices  are  not  discretionary  with  the 
carrier.     They  have  the  binding  force  of  principles. 


36  RAIL  WA  Y  RA  TE8. 

They  are  necessary  coiiditious  of  business,  of 
progress.  It  is  not  necessary  to  make  them  the 
subject  of  legislative  enactments  or  other  govern- 
mental interference.  They  are  inherent.  They  are, 
however,  subject  to  these  limitations:  in  carrying 
out  the  principles  that  govern  carriers,  as  well  as 
other  traders,  equal  intelligence  will  not  be  exer- 
cised in  every  instance.  There  will  be  sagacious 
traffic  managers  and  dull  traffic  managers,  just  as 
there  are  shrewd  merchants  and  stupid  merchants. 
But  they  are  all  animated  by  the  same  idea,  by  like 
conscientiousness.  What  they  lack  in  comprehen- 
sion is  not  to  be  made  good  by  extraneous  action. 
Time  will  cure  the  evil  in  every  case.  Intelligence 
will  finally  govern  here,  as  it  does  elsewhere. 


CHAPTER   III. 

EAILWAY    EATES  —  THEIR    BASES     AND     THE     INFLU- 
ENCES  AFFECTING   THEM. 

Tlie  value  of  the  service  to  the  consumer,  its 
cost,  and  the  competition  of  carriers  and  markets, 
will  ever  be  i)otent  factors  in  determining  the  rates 
carriers  of  every  description  charge.  The  demand 
for  transportation  increases  each  year;  so  long  as 
it  is  remunerative,  the  supply  will  keep  pace  there- 
with. Its  character  is  at  once  varied  and  pictur- 
esque. We  are  more  concerned,  however,  in  that  of 
railroads.  But  the  water- courses  of  the  world  are  of 
supreme  importance.  ' '  The  Almighty  has  furnished 
by  far  the  most  important  avenue  of  transportation; 
our  navigable  rivers  furnish  it;  our  artificial  canals 
furnish  it.  Our  water-ways  are  abundant  and  varied. 
We  have  thousands  of  miles  of  rivers  that  go  un- 
vexed,  unharassed,  untaxed,  to  the  sea.  We  have 
lakes  which  are  inland  seas,  and  upon  which  there 
are  no  charges;  they  roll  and  shine  j)erpetually — 
ceaseless,  constant,  everlasting  competitors  of  every 
artificial  form  of  transportation.  In  their  quiet 
way — as  quiet  and  as  resistless  as  the  tides — they 
confront  every  railroad  corporation  in  the  country 
and  say  to  it :  '  In  the  regulation  of  your  charges, 
thus  far  shalt  thou  go  and  no  farther.'  "*     These 

*  Emory  A.  Storrs  before  the  Committee  on  Commerce,  February, 
1883. 

(37) 


38  RAILWAY  RATES    . 

conditions,  while  jiotent  factors  in  the  United  States, 
are  also  noticeable  in  every  other  country. 

The  rate-making  i)ower  of  railways  is  an  adaptive 
one.  It  must  take  into  account  the  producer,  mid- 
dleman, and  consumer,  as  well  as  the  carrier.  It 
must  conform  to  the  market  and  the  comj)etitive 
influences  of  other  carriers.  It  is  only  in  isolated 
and  petty  cases  that  the  rate- maker  exercises  any 
discretion  whatever.  It  is  never  greater  than  that 
of  the  merchant  who  puts  a  price  on  his  wares. 
"The  commercial  and  industrial  forces  of  the  coun- 
try are  much  more  potential  in  determining  rates 
than  are  all  the  railroad  managers  of  the  country, 
either  when  acting  separately  or  in  concert.  .  ,  . 
The  commercial  and  industrial  forces  of  the  whole 
country  have  been  brought  into  instant  and  intense 
comx3etition  with  each  other.  This  struggle  imposes 
restraint  upon  freight  charges  which  the  railroad 
manager  is  powerless  to  withstand."*  Not  only  is 
this  so  of  our  own  country,  but  the  commercial  and 
industrial  interests  of  the  whole  world  are  so  inter- 
woven— compete  so  actively  with  each  other — that 
they  affect  the  rates  of  local  carriers  quite  as  j)ower- 
fully  as  do  local  interests  and  rivalries. 

Primarily,  the  cost  of  a  property,  and  the  expense 
incident  to  its  operation,  would,  conjointly,  it  was 
thought,  determine  arbitrarily  the  price  that  should 
be  charged.  Experience  has  proven  that  this  expect- 
ation was  not  well  founded.  It  has  been  found  that 
the  cost  of  the  property  influences  the  rate  only  in 
those  cases  where  monopoly  exists,  or  where  govern- 

*  Joseph  Nimmo,  Jr. 


AlVD  GOVERNMENT  CONTROL.  39 

ments  assume  to  fix  the  rate.  In  the  latter  case,  any 
other  basis  would  be  an  acknowledgement  of  the  right 
of  the  government  to  confiscate  private  property. 
,The  result  is  that  the  rates  made  by  monopolies  and 
governments  are  frequently  prohibitory. 

The  profits  of  the  carrier  are  unequally  distri- 
buted. He  is  the  creature  of  circumstances.  "A 
rule  that  should  measure  charges  by  cost  would 
work  an  entire  revolution  in  the  business  of  trans- 
j)ortation,  since  it  would  no  longer  be  j)racticable  to 
make  articles  whose  value  was  great  in  proportion  to 
bulk  or  weight  aid  in  transi)ortation  of  articles  of  a 
different  nature,  and  the  carrier  would  be  compelled 
to  demand,  upon  the  traffic  in  heavy  and  bulky 
articles,  such  compensation  as  in  many  cases  the 
traffic  could  not  ];)ossibly  bear.  .  .  .  Nothing 
more  disastrous  to  the  commerce  of  a  country  could 
]30ssibly  happen  than  to  require  the  rating  for  rail- 
road transportation  to  be  fixed  exclusively  by  this 
one  rule."^ 

In  measuring  the  elements  that  enter  into  cost  of 
constructing  and  operating  railways,  the  reader  can 
not  but  be  impressed  with  the  scox)e  and  magnitude 
of  the  subject,  t  He  can  not  but  be  struck  with  the 
multitude  of  things  to  be  considered,  many  of  them 
of  petty  consequence,  but  in  the  aggregate  of  prodi- 
gious importance  and  x>erplexing  uncertainty.     He 


*"  Fourth  Annual  Report,  Interstate  Commerce  Commission," 
pages  15  and  16. 

f  This  phase  of  the  subject  will  be  explained  in  volumes  devoted 
to  "Construction,  Capitalization  and  Maintenance,"  "The  pur 
chase,  care,  and  use  of  Material,"  "Railway  Disbursements  and 
Accounts,"  etc. 


40  RAILWAY  HATES 

will  see  that  tliey  absolutely  and  forever  negative 
legislation  or  other  governmental  action  based  on 
uniformity  of  conditions  and  cost,  and  constitute  a 
fatal  drawback  to  any  attempt  to  impose  the  same 
obligations  upon  different  proi)erties.* 

It  needs  no  argument  or  illustration  to  prove  that, 
equitably,  a  railway  company  is  entitled  to  base  the 
price  of  its  services  on  a  reasonable  return  on  the 
cost  of  its  property  and  the  expense  of  operating. 
The  right  is  inherent.  Rates  thus  based  may  be 
termed  the  maximum.  In  practical  application, 
however,  the  basis  is  that  which  will  secure  a  i^rofit 
to  the  railroad  company  over  and  above  the  cost  of 
o];)erating,  and,  at  the  same  time,  stimulate,  to  the 
greatest  extent  possible,  the  production  of  the  article 
carried.  This  purj^ose  underlies  all  rates.  It  applies 
to  passengers  as  well  as  freight.  Rates  are  in  every 
instance  fixed  with  a  view  to  their  favorable  effect 
on  the  tiling  transported. 

Innumerable  conditions  surround  and  govern  the 
making  of  rates.  The  value  of  the  product  measur- 
ably influences  it,  but  not  proportionately.  A 
tariff  based  on  the  relative  value  of  the  articles 


*  "A  rate  that  would  bo  just  to  the  trunk  lines  of  the  Central 
States,  would  be  destructive  to  expensive  railways  reaching  the 
mines  of  Colorado  or  California.  Rates  which  the  mines  in  the 
Rocky  Mountains  or  Sierra  Nevada  can  pay,  and  must  pay,  if  rail- 
roads are  to  be  built  for  them,  would  amount  to  confiscation  if 
applied  to  the  coal  mines  of  Pennsylvania,  or  the  grain  of  Iowa  and 
Nebraska.  The  schedule  which  would  be  just  for  a  railway  at  one 
time  would  be  unjust  at  another.  The  branch  line  through  a  new 
country  must  collect  higher  rates  at  first,  than  when  it  has  developed 
the  productive  power  of  the  region." — J.  F.  Hudson,  "  The  Rail- 
ways and  the  Republic,"  page  339, 


AND  GOVERNMENT  CONTROL.  41 

carried  would  be  prohibitory  in  many  instances. 
The  space  occujDied  and  the  attendant  risk  are  fac- 
tors. The  indirect  advantage  to  be  derived  from  a 
business  also  affects  the  price  charged.  Railways 
do  a  wholesale  and  retail  business,  and  the  rate  in 
particular  cases  is  governed,  more  or  less,  as  it  is 
with  all  manufacturers,  by  the  amount  of  the  pro- 
duct. In  other  words,  quantity  influences  the  price. 
The  exceptional  relation  that  certain  articles  of  a 
standard  character  bears  to  the  community  has  been 
thought  to  affect  favorably  the  price  asked  for 
carrying.  The  influence,  however,  arises  from  the 
quantity  offered,  its  comj)etitive  character,  and  its 
relatively  small  value,  and ^  not  from  the  fact  that  it 
represents  a  necessary  of  life.  * 

Traffic  classifications  of  railroads  are  a  means  of 
indicating  the  rate.  Local  conditions  do  not  affect 
them,  except  in  purely  local  matters.  Rehitive 
values,  weight,  bulk,  and  risk,  are  prime  factors. 
While  still  imperfect,  the  thought  and  labor  that 
have  been  given  them  render  them  marvels  of  com- 
mercial wisdom  and  skill.  The  results  arrived  at 
embody,  as  nearly  as  human  intelligence  can,  the 
experience  of  trade  and  the  wants  of  commerce,  the 


*  "  The  discretionary  power  which  the  managers  of  railroads  are 
able  to  exercise  in  the  adjustment  of  freight  tariffs,  and  whicli  they 
are  able  to  bring  to  bear  toward  influencing  the  course  of  trade,  is 
subject  to  several  very  important  qualifying  and  limiting  conditions, 
proceeding  from  competition  exerted  through  the  markets  and  from 
the  direct  influence  which  merchants  and  other  citizens  are  able  to 
bring  to  bear  toward  regulating  freight  charges  in  the  general  course 
of  trade.  .  .  .  This  is  especially  the  case  with  respect  to  the 
rates  for  transportation  of  grain,  flour,  provisions,  and  the  other 
necessaries  of  life." — Joseph  Nimmo,  Jr. 


42  HATLWAY  RATES 

machinery  necessary  to  set  it  in  motion  and  develojD 
it.  The  burdens  enforced  are  equitably  distributed, 
and  intended  to  be  so  api:)ortioned  as  to  create  the 
least  embarrassment  to  trade,  to  engender  the  least 
complaint,  the  least  hardship)  to  the  community. 
They  conform  in  all  things  to  the  law  of  sujiply  and 
demand;  to  the  laws  of  trade. 

The  rate  foreshadows  the  concern  the  people  have 
in  the  ijroduct.  Thus,  if  the  cost  of  carriage  "con- 
stitutes a  large  part  of  the  ultimate  jorice  of  the 
article,  it  is  classed  low,  and  the  rate  is  made  very 
little  above  the  bare  expense  of  carriage.  On  the 
other  hand,  if  the  cost  of  carriage  constitutes  but  a 
small  i3art  of  the  ultimate  ]price,  the  article  is  classed 
high."*  This  is  in  accordance  with  the  iDractices  of 
business,  based  on  economic  grounds  everywhere 
recognized,  that  the  price  of  a  thing  shall  be  such  as 
it  will  bear.  If  railroads  were  to  attempt  to  assess 
"low-class  traffic  with  its  ratable  proportion  of  all 
expenses  based  on  cost  of  service,  .  .  .  the  con- 
sumer, unable  to  pay  the  cost  of  production  and 
high  transportation  charges,  both  of  which  enter 
into  the  cost  of  the  article  to  him,  Avould  seek  a  sub- 
stitute either  in  a  different  article  or  from  a  different 
field  of  production. "-I;  If  a  substitute  could  not  be 
found,  the  expense  of  living  would  advance  to  meet 
the  enhanced  cost. 

We  grow  each  day  in  our  comprehension  of 
the  laws  governing  transjportation.     "The  earliest 


*  W.  D.  Dabuey,  "  The  Public  Regulation  of  Railways,"  page 
163. 

f  Ibid,  pages  164,  165. 


AND  GOVERNMENT  CONTROL.  43 

freight  tariffs  involved  little  or  no  classification. 
Each  step  toward  our  jDresent  system  has  been 
accompanied  by  increased  efficiency.  It  has  made 
cheap  traffic  possible,  has  helped  high-class  traffic."* 
In  other  words,  as  the  owners  of  railroads  have 
become  better  acquainted  with  the  natural  laws 
governing  their  prox)erties,  they  have  been  able  to 
make  them  moi'e  generally  useful. 

Rates  are  based  upon  what  the  traffic  will  bear. 
For  instance,  a  ton  of  lumber  has  such  small  in- 
trinsic value,  that  if  the  same  rate  were  charged 
upon  it  as  is  imposed  upon  dry  goods,  there  would 
be  no  lumber  carried,  for  the  lumber  traffic  would 
not  bear  the  high  rate  placed  upon  dry  goods. 
' '  We  hear  a  great  deal  said  about  charging  '  what 
a  traffic  will  bear;'  and  the  man  who  avoAvs  this 
as  his  principle  is  compared  by  anti-monopolists 
with  the  robber  barons  of  the  Middle  Ages.  In 
the  proper  meaning  of  the  principle,  the  case  is 
just  the  opposite.  Charging  what  the  traffic  will 
bear  is  a  very  different  thing  from  charging  wliat 
the  traffic  will  not  bear.  .  .  High  rates  are  not 
to  be  regarded  as  a  tax  which  could  be  removed 
if  the  low  rates  were  abandoned.  When  we  come 
to  examine  the  practice  of  European  countries,  where 
tlie  attempt  has  been  made  to  base  rates  on  the  cost 
of  service,  we  shall  find  these  views  confirmed  ;  and 
we  shall  further  find  that  the  effort  to  prevent  dis- 
crimination as  a  system  results  in  leveling  up  rather 
than  in  leveling  down."t 


*  Arthur  T.  Hadley,  "Railroad  Transportation,"  page  113, 
t  Ibid,  pages  76,  124. 


44  RAIL  WA  Y  BA  TE8 

Intelligent  discrimination  is  the  governing  prin- 
ciple of  railway  classifications,  as  it  is  of  every- 
thing else  connected  with  trade.  Uniformity  is 
impossible.  The  rate  takes  cognizance  of  the  traffic 
from  every  point  of  view.  To  attempt  to  base  it  on 
any  other  ground  "would  give  us  dear  food  and 
dear  fuel,  and  would  injure  both  the  railroads  and 
the  districts  which  they  serve."* 

Railways  may  and  do  agree  among  themselves  to 
maintain  a  uniform  rate;  that  they  will  act  together 
in  increasing  or  diminishing  it.  This  is  both  prac- 
ticable and  just,  and  in  harmony  with  well-estab- 
lished j)ractices.  It  is  not  inconsistent  with  the 
adjustment  of  rates  based  on  their  value  and  the 
fluctuations  of  markets.  Managers  may  think  they 
raise  or  lower  rates  of  their  own  volition.  They  do 
not.  Conditions  are  superior  to  men,  and  while 
carriers  are  sometimes  loth  to  recognize  it,  they  are 
made  aware  of  the  fact  by  their  inability  to  main- 
tain a  rate  inconsistent  therewith.  Herein  lies  the 
protection  of  the  community  from  acts  of  inj  ustice 
upon  the  part  of  railroads;  from  anything  more 
than  momentary  hardshij).  If  carriers,  and  not  the 
markets  of  the  world,  fixed  the  rate,  then  it  might 
be  wise  iDerhaps,  (I  don't  say  it  would),  to  ask  the 
intervention  of  the  government.  But  the  carrier  is 
a  passive  agent  merely.  Wherever  a  product  must 
seek  a  general  market,  or  its  price  is  thus  deter- 
mined, the  law  of  supply  and  demand  fixes  the  rate 
the  carrier  shall  charge  for  transporting  it.  In 
other  cases  special  influences  intervene.     In  prac- 

*  Arthur  T.  Iladley,  "  Railroad  Transportation,"  page  114. 


AND  GOVERNMENT  CONTROL.  45 

tice,  an  arbitrary  rate  may  be  enforced  within  a 
limited  range  on  merely  local  traffic.  But  it  must 
be  reasonable,  must  be  clearly  within  the  means  of 
consumers,  and  generally  fair  to  all  parties,  other- 
wise production  will  cease  or  seek  other  means  of 
conveyance.  Its  loss  would  react  disastrously  on 
the  carrier  in  many  ways,  because  his  interests  are 
as  much  bound  up  in  the  prosperity  of  the  communi- 
ties he  serves  as  are  those  of  the  people  themselves. 
He  is,  therefore,  interested  in  fostering  them.  This 
fact  many  who  are  in  the  habit  of  discussing  rail- 
way matters  persistently  ignore  or  deny.  It  is  all 
imx^ortant,  because  more  i^otent  in  securing  fair  rates 
than  any  interference  from  without  can  possibly  be. 
Community  of  interest  and  the  governing  force  of 
markets  everywhere  render  extraneous  interference 
unnecessary. 

Carriers  could  not,  if  they  would,  combine  among 
themselves  to  do  an  unjust  thing.  To  combine  to 
maintain  an  unfair  rate,  would  be  to  combine  to 
destroy  their  traffic.  Equity  must  be  observed, 
otherwise  business  will  cease.  This  i^roposition  is 
self-evident. 

The  demands  made  upon  railroads  are  oftentimes 
picturesque  in  their  grotesqueness.  The  moral 
claim  the  people  assert  over  them  is  also  oftentimes 
absurd.  Thus  the  claim  that  the  government  may 
arbitrarily  interfere  in  the  affairs  of  railroads, 
because  of  the  right  of  eminent  domain  exercised  by 
them,  is  a  case  in  point.  As  if  the  right  had  any 
inherent  value  to  those  who  furnish  the  money  to 
build  railways  !     Its  exercise  primarily  is  valuable 


46  RAIL  WA  Y  RATES 

to  the  comrminity,  but  to  no  one  else.  Those  who 
build  railways  pay  fourfold  for  every  rood  of  land 
they  get.  But  while  the  right  of  condemnation  pos- 
sesses no  inherent  value  to  capitalists,  its  exercise 
is  of  enormous  value  to  the  peo]3le,  because  without 
it  a  railroad  could  not  and  would  not  be  built.  In 
such  case,  who  would  be  the  sufferer  \  The  peoi)le 
who  were  denied  facilities  of  transiDortation,  or  the 
capitalist?  Certainly  not  the  latter,  because  he  has 
other  ways  of  investing  his  money.  If  property 
acquired  by  railroads  by  act  of  condemnation  could 
be  used  for  other  purposes,  the  right  might,  under 
remote  contingencies,  possess  a  j)ossible  value.  But 
property  thus  acquired  reverts  to  its  oiiginal  owner, 
when  no  longer  used  as  intended.  This  franchise, 
therefore,  upon  which  so  many  demands  are  i:>re- 
dicated,  like  many  other  iui  aginary  benefits  con- 
ferred u]3on  railroads,  will  be  found  to  be  valueless 
when  critically  examined.  But  oceans  of  ink  and 
tons  of  paper  will  continue  to  be  wasted  \\j)on  it 
annually,  so  long  as  ignorant  or  designing  men  write 
and  silly  people  can  be  found  to  read.  The  excess- 
ive XDrices  that  railway  companies  are  compelled  to 
pay  in  the  exercise  of  the  right  of  eminent  domain, 
rob  the  privilege  of  anything  like  favor,  and  give  it 
the  appearance  of  robbery,  carried  on  under  the 
guise  of  law  by  comj)laisant  courts  and  aggressive 
juries.*    The  experience  of  railroads  is  uniform  in 

*Here  again,  in  the  matter  of  eminent  domain,  it  is  sought  to 
make  it  appear  that  the  railroad  interest  is  sui  generu,  that  it  differs 
from  all  others.  The  fact  that  it  has  been  accorded  the  power  to 
take  from  individual  owners  and  use  in  its  business  the  land  it  re- 
quires, albeit  it  must  pay  the  owner  more  than  the  value  thereof,  is 


AlS^T)  OOVERmiEKT  CONTROL.  47 

tlie  fact  that  justice  and  common  honesty  are 
systematically  denied  them  in  the  exercise  of  the 
right  of  condemnation.  It  is  not  a  favor,  but  a  legal 
means  of  plundering  them. 


cited  as  a  reason  why  the  government  may  interfere  in  the  conduct 
of  its  affairs.  The  fact  that  railroads  have  been  donated  land  by  the 
government,  or  have  been  accorded  the  povrer  to  acquire  such  land 
as  they  need  in  their  business  upon  payment  therefor,  does  not  place 
tliem  in  a  category  by  themselves.  Other  interests  have  been  ac- 
corded gifts,  dispensations,  and  privileges  by  the  government.  But 
one  instance  seems  closely  to  parallel  that  of  the  railways,  namely, 
the  agricultural  interest.  This  has  received  at  the  hands  of  the  gov- 
ernment something  far  more  valuable,  far  more  tangible,  than  the 
right  of  eminent  domain.  It  has  been  granted  millions  of  acres  of 
fertile  land,  and  may  to-day  acc^uire  many  millions  more,  at  merely 
nominal  cost,  and  this  is  so  in  all  countries  save  those  of  Europe. 
The  agricrdturist  has  but  to  adapt  the  land  by  his  labor  and  skill  to 
his  purpose,  just  as  the  railways  have.  The  products  he  reaps  from 
the  face  of  his  government-granted  acres  are  not  less  matters  of  pub- 
lic concern  than  the  transportation  which  the  carrier  vends;  his  corn, 
his  wheat,  his  cattle,  are  no  less  a  necessity  to  the  community  than 
the  means  of  carriage  the  railway  provides.  Yet  we  do  not  hear  it 
suggested  that  the  government  shall  interfere  in  the  affairs  of  the 
farmer,  shall  prescribe  the  rules  that  shall  fix  the  price  he  shall  re- 
ceive for  his  products,  shall  create  or  annihilate  his  markets,  shall 
dictate  the  kind  and  cxuantity  of  crops  and  stock  he  shall  raise,  shall 
exercise  a  minute  supervision  over  his  methods  and  appliances,  shall 
see  that  his  revenues  are  wisely  applied.  Yet,  if  the  farming  inter- 
est is  wasteful,  shiftless,  or  incompetent,  it  works  a  pxiblic  iujuiy  by 
keeping  down  i^roduction  and  enhancing  the  price  of  its  products; 
if  it  withholds  its  crops  in  its  storehouses,  it  heightens  the  cost  to  the 
consumer.  But  these  things  have  not  as  yet  invited  legislative  inter- 
ference in  agriculture.  The  farmer,  with  the  staple  of  his  business 
furnished  him  by  the  government,  conducts  his  business  as  he 
pleases,  sells  his  products  how  and  when  he  pleases,  or  stores  them 
away  till  he  can  get  his  pi'ice,  and  the  community  does  not  suffer, 
because  experience  has  proven  that  natural  laws  are  fully  adequate 
for  the  regulation  of  the  matter.  And  this  is  right.  But  it  is  as  true 
of  railway  transportation  as  it  is  of  the  products  of  the  farm. 


48  RAILWAY  RATES 

The  discussion  of  railway  rates  takes  on  a  wider 
range  each  day.  One  writer  likens  the  charges  of  car- 
riers to  tolls.  Another  to  the  duties  of  governments. 
Very  well !  Call  them  tolls  or  duties.  But  the  fact  that 
they  represent  actual  disbursements  for  material, 
labor,  and  other  necessary  expenses  incurred  in 
operating,  including  a  return  on  the  money  used  in 
building,  remains.  There  is  a  bo /t  a  Jlde  considern- 
tion  in  every  case.  Moreover,  through  association 
of  interest,  the  people  receive,  in  exchange  for  a 
nominal  return  on  the  capital  invested  in  railroads, 
the  experience,  energy,  and  wisdom  of  an  army  of 
resolute  and  sagacious  business  men,  gifted  with  a 
knowledge  of  the  needs  of  the  community,  and 
possessing  the  capital  and  disj)osition  to  meet  such 
needs.  Their  services  could  not  otherwise  be  ob- 
tained. If  the  business  were  carried  by  the  gov- 
ernment, we  should  have  to  be  content  with  hired 
agents  of  a  perfunctory  and  very  commoni)lace  kind. 
The  difference  is  the  difference  between  genius  and 
mediocrity,  between  energy  and  sloth,  between  ex- 
perience and  the  want  of  it,  between  knowledge  and 
ignorance,  between  wisdom  and  folly.  This  is  one 
of  the  resultant  benefits  that  grow  out  of  the  private 
ownershij)  and  management  of  railroads. 

In  the  regulation  of  rates  it  has  been  claimed  that 
they  should  be  based  on  the  average  received  by  the 
carrier  for  the  whole  service  rendered,  after  taking 
into  account  s^Decial  rates,  rebates,  free  transporta- 
tion, and  other  necessary  discriminations.  The 
claim  is  based  on  the  theory  that  these  concessions 
are  unnecessary;  that  the  business  that  is  done  on 


AND  GOVERNMENT  CONTROL.  49 

reduced  rates  would  be  carried  on  without  such 
concessions;  that  they  are,  in  fact,  the  result  of 
collusion.  I  cite  the  case  merely  to  illustrate  the 
length  to  which  folly  and  ignorance  may  extend, 
not  as  ]  equiring  an  answer. 

The  carriers  of  the  world  reach  every  important 
source  of  supply  and  demand.  This  is  why  an 
unjust  rate  is  impossible.  To  attempt  its  enforce- 
ment would  be  to  cripple  the  industry  it  is  to  the 
interest  of  the  carrier  to  foster.  Markets  are  no 
longer  local.  Railroads  have  ceased  to  be  so  in 
their  ability  to  control  rates.  A  consolidation  of  all 
the  railroads  of  a  great  country,  like  that  of  the 
United  States,  would,  however,  destroy  competition 
in  many  minor  directions,  and  would,  consequently, 
entail  more  or  less  hardship.  But  it  would  still 
be  preferable  to  government  management,  because 
it  would  be  intelligent  and  business-like.  A  com- 
bination of  all  the  carriers  of  the  world  is  necessary 
to  the  creation  of  a  complete  monopoly.  The  rail- 
roads of  every  country,  ' '  the  tides  of  the  seas,  the 
currents  of  rivers,  the  swells  of  lakes,  the  waters  of 
canals,  and  the  rivalry  of  adjacent  nations,  enforce 
transportation  conditions."*  Combinations  of  a 
local  nature  do  not  destroy  or  cripple  competition. 
Nor  do  limited  pools  sensibly  affect  it.  On  the 
contrary,  they  strengthen  it,  because  they  render  it 
more  intelligent.  Monopoly  is  no  longer  possible, 
except  in  the  case  of  local  products,  such  as  gas, 
water,  street  railways,  and  the  like.     So  long  as  car- 


*  G.  R.  Blancliard,  "Politico-railway  Problems  and  Theories," 
page  43. 
4 


50  RAIL  WA  T  RA  TE8 

riers  serve  a  common  purpose,  and  their  interests  lie 
apart,  there  can  be  no  such  thing  as  a  monopoly  of 
rates.  When  competition  ends,  legislative  interfer- 
ence may  begin.  Such  interference  under  other 
conditions  is  not,  however,  necessarily  injurious. 
If  honestly,  temx)erately,  and  discreetly  exercised, 
it  may  prove  highly  beneficial.  Its  effect  is  to 
silence  unjust  clamor.  It  is  only  injurious  when 
ignorantly  or  demagogically  exercised.  But  in 
regard  to  the  regulation  of  rates,  so  long  as  the 
markets  of  tlie  world  are  supplied  by  carriers  acting 
independently  of  each  other,  competitive  forces  are 
more  effective  in  preventing  injustice  than  the  per- 
functory act  of  any  man  or  body  of  men.  The 
beneficent  effect  of  competition  can  not  be  over- 
estimated. Its  forces  are  "  the  efforts  of  rival  sellers 
to  secure  a  market  for  their  goods,  each  striving  to 
offer  better  terms  than  his  competitors.  Competi- 
tion is  what  j)revents  any  individual  from  fixing 
prices  to  suit  himself,  because  his  rivals  will  give 
lower  iDrices,  and  he  will  get  no  business  at  all."* 
Railways  have  not  destroyed  the  i3rinciple  of  com- 
petition nor  lessened  its  value.  It  has  simply  taken 
on  a  wider  field  than  formerly.  They  have  made  it 
universal.  But  the  great  and  varied  interests  that 
cluster  about  it,  as  exercised  by  them,  render  it 
difficult  for  the  student  to  discover  and  analyze  its 
oi)erations.  It  affects  everything  we  eat  or  wear. 
''The  wheat  of  Dakota,  the  wheat  of  Russia,  and 
the  wheat  of  India  come  into  direct  competition. 
The  supply  at  Odessa  is  an  element  in  determining 


*  Arthur  T.  Hadley,  "  Railroad  Transportation,"  page  63. 


AND  OOVERNMENl'  GON'TROL.  51 

the  price  at  Chicago.  .  .  .  Cabbages  from  Ger- 
many contend  with  cabbages  from  Missouri  in  the 
markets  of  New  York."* 

In  the  oi)eration  of  carriers,  discriminations  not 
based  on  natural  causes  are  im^^ossible.  When 
thus  suiDerinduced,  they  are  irresistible  and  irreme- 
diable. To  attempt  to  enforce  uniformity,  under 
such  circumstances,  would  be  to  entail  evils  infin- 
itely greater  than  the  nominal  ones  sought  to  be 
remedied. 

The  complaint  so  often  put  forth,  that  railroads 
have  favored  one  individual  at  the  expense  of 
another,  exce^it  on  sound  economic  grounds,  bene- 
ficial to  tlie  community,  is  generally  untrue.  Iso- 
lated exceptions  to  the  rule  prove  nothing. 

Much  of  the  criticism  bestowed  upon  railroads 
is  sentimental,  demagogical,  or  communistic.  Much 
of  it  is  merely  the  mouthings  of  ignorant  men  talking 
to  ignorant  men.  It  has,  however,  been  an  avenue 
to  public  notice  and  favor;  a  political  "fad."  Pro- 
duction is  not  retarded,  but  in  every  case  expedited 
by  the  rates  of  carriers.  They  are  nominal  only  — 
a  pittance  merely,  f  ' '  The  cost  of  delivering  bread 
from  the  baker  to  his  customer  is  a  larger  element 
in  the  price  of  bread  than  the  cost  of  getting  wheat 
from  the  farmer  to  the  miller,  and  flour  from  the 


*  Arthur  T.  Hadley,  ' '  Railroad  Transportation,"  pages  65  and  66. 

f  "  The  value  of  the  product  of  five  hundred  operatives  in  a 
coarse  cotton  factory  in  Massachusetts  is  over  $1,000,000.  All  the 
western  flour  and  meat  which  these  operatives  need  in  a  year,  can 
be  moved  from  Chicago  to  Lowell  at  a  cost  of  $600,  and  some- 
times for  less."  —  Edward  Atkinson,  "The  Distribution  of  Pro- 
ducts," page  38. 


52  HAIL  WA  7  RA  TE8 

miller  to  the  baker,  though  the  one  is  but  a  few 
hundreds  of  yards,  and  the  other  as  many  hun- 
dred miles."* 

The  influences  to  which  we  owe  the  low  rates  of 
American  railways — rates  much  less  than  those  of 
other  countries — are,  in  the  main,  due  to  better  facil- 
ities and  more  economical  methods,  superinduced 
by  intense  and  widespread  rivalry.  The  immense 
distances  traversed,  and  a  desire  to  secure  a  load  both 
ways,  have  had  something  to  do  with  it.  The  amal- 
gamation of  rival  and  continuous  lines  has  been 
beneficial.  Combinations  of  sympathetic  interests 
that  are  the  result  of  natural  causes  are  always 
good.  Among  these  may  be  mentioned  the  consoli- 
dation of  continuous  railways  and  the  formation  of 
pools.  On  the  other  hand,  combinations  occasioned 
by  extraneous  influences,  such  as  those  caused  by 
the  interference  or  oppression  of  the  State,  are  not 
likely  to  be  so  beneficial,  because  they  are  more  or 
less  artificial. 

Englishmen  and  Americans  make  the  same  com- 
plaints in  regard  to  the  rates  of  railways,  namely, 
that  they  are  excessive;  that  special  advantages  are 
afi'orded  competitive  interests;  that  goods  are  in 
some  cases  carried  at  unduly  low  rates,  losses  being 
recouped  elsewhere.  Heretofore,  England  has  x^er- 
mitted  carriers  to  charge  what  the  traffic  will  bear, 
to  make  special  rates  to  meet  particular  circumstan- 
ces. The  necessity  and  value  of  these  provisions 
have  been  generally  recognized  in  every  coun- 
try where  railroads  are  operated,  save  the  United 


*  Arthur  T.  Hadley,  "  Railroad  Transportation,"  pages  103,  104. 


AND  GOVERNMENT  CONTROL.  53 

States.  In  the  United  Kingdom  the  supervisory 
power  of  the  government  has  been  merely  nominal. 
The  j)eor)le  have  had  greater  confidence  in  the  ability 
and  wisdom  of  their  business  men  than  in  their  gov- 
ernment.* On  the  other  hand,  the  belief  in  the 
efficacy  of  State  interference  in  the  management  of 
railways  is  cardinal  in  many  parts  of  the  United 
States.  Thus,  the  commissioners  of  one  great  State 
oxienly  boast  of  their  active  infiuence  in  determining 
what  railroads  shall  charge,  claiming  that  within  the 
restricted  area  of  their  activity  they  have,  through 
arbitrary  action,  placed  competitive  and  non-compet- 
itive business  on  the  same  i^lane;  that  they  have,  in 
fact,  subverted  the  law  of  comx3etition  upon  which 
the  world  is  dependent  for  its  development,  and  the 
comforts  and  the  necessities  it  enjoys.  They  openly 
boast  that,  under  the  powers  they  exercise,  "  compe- 
tition which  could  only  operate  at  certain  points 
touched  by  independent  lines,  if  left  to  natural  laws, 
is,  by  the  statutory  penalties  denounced  against  dis- 
crimination, made  to  o^^erate  equally  at  all  points, 
intermediate  as  well  as  directly  competing. ' '  I  leave 
the  reader  to  judge  as  to  what  the  effect  would  be  if 
similar  powers  were  exercised  by  every  government. 
Nine-tenths  of  the  world  would  have  to  be  aban- 
doned. No  more  monstrous  proposition  ever  found 
birth  in  the  brain  of  civilized  man.  The  commis- 
sioners in  question  do  not  regard  the  exercise  of 
their  prerogatives  as  unjust  or  oppressive.  "To 
say  a  railroad   company  may  discriminate  in  any 

*  Their  disposition  to  depart  from  this  practice,  as  evinced  in  a 
recent  act  of  Parliament,  is  to  be  deplored. 


54  MAIL  WAY  BATES 

degree  between  different  places  or  between  different 
persons,  or  that  the  case  should  be  left  to  the  vague 
and  inadequate  remedies  afforded  by  the  common 
law  upon  the  subject  of  discrimination,  would  be  to 
advocate  the  j)ractical  subjection  of  all  other  inter- 
ests to  that  of  the  railroads."  In  other  words,  they 
would  have  us  believe  that  railroads  are  governed 
by  mechanical  agencies,  which  only  the  intervention 
of  the  government  can  prevent  becoming  oppressive. 
Self-interest  and  competitive  forces  are  alike  ignored. 
The  i^icture  is  an  exaggerated  one;  an  extreme  view 
of  the  virtues  and  benefits  of  government  interfer- 
ence. It  is,  however,  shared  in  by  many.  It  does 
not  matter  that  it  is  contrary  to  generally  accepted 
practices  recognized  in  every  country  save  the  United 
States  that  special  rates  are  necessary;  that  discrim- 
ination is  not  only  unavoidable,  but  beneficial;  that 
rates  must  adjust  themselves  to  localities  and  mar- 
kets; that  competition  is  a  recognized  j^rinciple,  to 
be  encouraged,  rather  than  condemned;  that  self- 
interest  is  a  potent  factor  in  ensuring  equitable  rates. 
On  the  other  hand,  another  State  commission*  is 
disposed  to  trust  rates  largely  to  natural  causes. 
"It  seems  apparent,  from  results  of  oi)erations  in 
this  State,  that  a  conservative  policy,  rather  than 
one  too  exacting,  as  illustrated  in  the  enactments  of 
some  of  our  sister  States,  is  the  one  best  serving  the 
real  interests  of  the  i^ublic,  and  most  certain  to 
secure  fair  rates  of  transportation.  While  the  law- 
making power  should  see  that  our  railroad  corpora- 
tions are  not  in  a  position  to  impose  unfair,  excessive 


*  That  for  Michigan,  U.  S.  A. 


AND  GOVERNMENT  CONTROL.  55 

or  discriminating  cluirges  upon  tlie  business  of  the 
State,  still,  if  lines  of  railroad  sliall  be  multiplied, 
oi:)ening  up  competing  ways  to  imj)ortant  trade 
centers,  and  affording  to  large  manufacturing  com- 
munities choice  of  routes  in  the  shipment  of  their 
l^roducts  to  market,  in  the  securing  of  their  trade, 
the  intelligent  management  of  our  railroad  proper- 
ties, which  sharp  competition  also  makes  liberal,  will 
leave  but  little  to  be  desired  in  the  way  of  legislation 
for  the  regulation  of  tariff  rates."*  Such  a  policy 
will  not  only  ensure  equitable  rates,  but  will  invite 
the  confidence  and  respect  of  men  who  have  money 
with  which  to  build  railroads  and  otherwise  enrich 
the  State,  while  the  policy  of  the  commission  pre- 
viously mentioned  will  be  directly  the  reverse. 

A  favorite  assumption  of  those  who  discuss  rail- 
way subjects  is,  that  wherever  aid  is  extended  in  the 
building  of  roads,  it  affords  just  grounds  for  State 
interference  afterwards,  among  other  things,  for  the 
enforcement  of  abnormally  low  rates.  •  The  x^oint  is 
not  well  taken.  Wherever  aid  is  extended  by  dona- 
tions of  money,  bonds,  right  of  way,  or  other  gra- 
tuities, the  donors  receive  an  equal  or  greater 
consideration  in  return.  It  may  be  assumed,  in 
every  such  instance,  that  the  railroad  would  not  be 
built  except  for  the  aid  extended;  that  the  field  is 
not  such  as  to  invite  capital.  If  it  were,  caj)ital 
would  neither  receive  nor  solicit  such  assistance.  It 
is  too  embarrassing.  No  ground,  therefore,  exists 
for  enforcing  subsequent  obligations  in  cases  of  this 
kind.     Besides,  railroads   thus  built  are  as  a  rule 


*Reportof  Commissioner  of  Railroads  for  Michigan,  1888,  page  ii. 


56  RAILWAY  BATES 

unproductive,  at  least  for  a  long  time.  But  the  dis- 
tricts they  traverse  derive  instant  and  abnormal 
advantages  from  their  presence.  If  obligation  rests 
on  either  x>arty,  therefore,  it  is  clearly  on  the  peoiDle 
and  not  on  the  railroad. 

The  right  of  the  legislature  to  control  the  rates  of 
carriers  is  not  questioned.  However,  such  inter- 
ference is  neither  necessary  nor  wise.  It  is  as  impoli- 
tic as  it  would  be  in  the  case  of  other  manufacturers 
and  middlemen.  But  the  semi-public  character  of 
railroads,  the  mutuality  of  interest,  as  between 
private  owner  and  public  use,  seem  to  make  the 
right  a  natural  one.  Therefore  it  is  not  disputed. 
"It  has  been  conceded  that  the  States  generally 
have  control  of  railway  rates,  the  ground  for  the 
exercise  of  such  power  being  the  doctrine  of  the 
inalienable  nature  of  the  sovereign  powers  of  a  State, 
such  as  the  police  x^ower  and  eminent  domain;  that 
when  a  franchise  to  take  atoll  is  granted,  it  must  be 
considered  as  being  in  the  hands  of  tlie  subject,  but 
still  belonging  to  the  States  and  fully  under  State 
control;  that  the  right  of  eminent  domain  can  only 
be  delegated,  not  alienated,  and  that  corporations 
exercising  it,  therefore,  possess  a  x)ublic  character, 
must  perform  a  public  function,  and  in  their  nature 
and  origin  are  subject  to  the  sovereign  authority. 
There  is  also  a  broader  basis  of  support  for  such 
control.  That  is  the  natural  and  circumstantial 
monopoly  that  railway  companies  possess  over  the 
traffic  tributary  to  them.  The  State's  right  to  regu- 
late tolls  rests  ax)on  the  consideration  that  the  State 
has  assisted  to  erect  a  monopoly,  against  which  the 


AND  GOVERNMENT  CONTROL.  57 

people  have  no  adequate  protection  but  its  sovereign 
power.  Again,  the  railroads  may  be  said  to  lie  at 
the  very  foundation  of  society,  as  organized  in 
America.  In  the  west,  at  least,  the  whole  social 
fabric  rests  on  railroad  transportation,  which  brings 
into  play  the  common-law  axiom  that  '  When 
private  proi)erty  is  so  used  that  a  i)nblic  interest 
attaches  to  it,  it  is  no  longer  strictly  private  prop- 
erty, and  the  right  of  the  legislature  to  exercise  con- 
trol of  it  by  statute  can  not  be  questioned.'  "  * 
When  we  remember  that  the  traffic  of  railways  is 
governed  by  competitive  influences  as  much  as  that 
of  water  transportation,  the  concessions  of  the 
government  are  found  to  be  nominal,  rather  than 
real.  They  do  not  create  a  monopoly,  or  special 
privilege,  any  more  than  they  do  when  the  govern- 
ment licenses  a  steamboat,  and  so  far  as  the  justice 
of  the  case  is  concerned,  the  government  has  no  more 
right  to  interfere  in  tlie  case  of  railways  than  in  the 
case  of  steamboats.  All  arguments  j)redicated  upon 
the  assumption  that  railways  are  monox)olies  are 
fallacious  and  misleading.  But  if  the  right  of  the 
State  to  interfere  is  allowed,  the  manner  in  which 
that  right  shall  be  exercised  is  still  of  the  greatest 
importance.  Its  enforcement  requires  the  exercise 
of  candor  and  tact;  a  due  observance  of  the  natural 
laws  that  govern  trade.  "  The  right  of  public  con- 
trol must  be  exercised  within  those  constitutional 
and  legal  limitations  which  environ  all  legislative  or 
administrative  acts.     Regulation  does  not  mean  con- 


*From  a  paper  read  before  the  Engineers'  Society  of  St.  Paul,  by 
Edwin  E.  Woodman,  in  April,  1«89. 


58  RAIL  WA  Y  BA TBS 

fiscation,  nor  the  right  to  authorize  rates  ruinous  to 
tlie  public,  nor  can  a  railroad  be  comx^elled  to  carry- 
without  reward."  * 

Public  control,  when  exercised,  should  not  be  per- 
functory or  superficial,  but  minute,  and  as  far  reach- 
ing in  intelligence  and  interest  as  when  exercised  by 
the  railways  themselves.  But  this  is  imj)ossible. 
The  structural  forces  of  government  do  not  permit 
it.  A  supervisory  power  may,  however,  be  main- 
tained by  a  government  in  a  less  minute  and  prac- 
tical Avay,  and  without  the  danger  that  attends  active 
interference.  The  exercise  of  the  rate-making 
power  involves  preparatory  education,  familiarity 
with  business  methods,  intimate  knowledge  of  proj)- 
erties,  rival  routes,  markets,  sources  of  suj^ply, 
every  attendant  detail  that  governs  the  business 
handled  and  the  district  provided  for.  No  one 
but  practical  men,  present  on  the  ground,  can 
possess  this  experience  and  knowledge.  The  com- 
i:»etitive  influences  of  markets  are  too  acute,  the 
influences  that  govern  trade  too  subtle,  to  be  settled 
out  of  hand.  The  farthest  we  may  go  blindly  in 
fixing  rates,  is  to  say  that  between  any  two  points 
they  shall  be  the  same  for  all  shippers,  time,  quan- 
tity, quality,  and  service  being  alike,  f  Except 
within  these  narrow  limits,  no  one  can  say  off-hand 
what  is  or  what  is  not  a  just  rate. 

Much  diversity  of  opinion  exists  as  to  the  unit  of 
service  for  railway   traflic.     Extremists  profess  to 


*  "  Report  of  Committee  of  State  Railroad  Commissions  and  Inter- 
state Commerce  Commission." 

t  The  car  lot,  for  instance,  being  the  unit  of  quantity  for  freight. 


AKD  OOVERNMENT  CONTROL.  59 

believe  that  the  same  rate  should  be  charged,  rela- 
tively, for  car  lots  as  for  one  hundred  pounds;  that 
one  hundred  x^ounds  should  be  the  basis.  The  effect 
of  this,  of  course,  would  be  to  reduce  enormously 
rates  on  small  shipments.  Car  lots  afford  a  more 
rational  basis.  The  train  load  is  a  still  more  con- 
servative estimate.  That  a  distinction  should  be 
made  between  wholesale  and  retail  shix)ments,  there 
can  be  no  doubt.  "Railroad  transportation  is  a 
commodity  which  is  bought  and  sold  as  much  as 
coal  is;  and  to  say  that  it  should  never  be  dealt  in 
except  at  retail  prices,  or,  as  has  been  said,  that  one 
thousand  cars  should  never  be  shipped  at  a  less  rate 
j)er  car  than,  one  train  or  one  single  car,  is  the  same 
as  saying  that  coal  should  be  sold  as  cheaply  for  one 
car  load  as  by  the  cargo  making  a  hundred  car  loads. 
It  is  wholly  a  question  of  expediency,  to  be  answered 
only  by  those  directly  interested.  To  do  away  with 
wholesale  trading  would  limit  distribution  and  con- 
sumption, and  would,  in  the  end,  hurt  the  small 
consumer.  The  world  needs  wholesale  traders  as 
much  as  it  needs  retail  traders.  Wholesale  prices, 
whether  of  transportation  or  other  commodities,  so 
far  from  being  an  unjust  discrimination,  are  of  the 
greatest  benefit,  because  they  encourage  distribu- 
tion, and  make  iDossible  the  carrying  of  large  local 
stocks,  thus  enabling  the  retail  traders  to  do  a  large 
business  on  small  capital,  which  means  a  small  profit 
on  each  transaction."* 

Generally  speaking,  the  interference  of  govern- 
ments in  the  commercial  differences  of  a  people  is 


*  Letter  of  C.  E.  Perkins. 


60  BAIL  WAY  RATES 

liarmlul.  Every  evil  carries  its  cure.  Its  correc- 
tion, moreover,  serves  to  make  those  concerned  self- 
reliant;  it  teaches  a  people  self-control,  manliness, 
aciiteness,  independence,  ability  to  look  out  for 
themselves,  self-government.  Such  interference,  in 
the  case  of  England  or  America,  is  unnecessary;  the 
people  do  not  generally  need  it.  It  only  delays 
justice,  does  not  accelerate  it.  This  has  been  abund- 
antly attested  in  the  case  of  America.  Her  great 
and  rapid  develoxoment  evinces  the  self-reliance  of 
her  people.  "  In  the  adjustment  of  commercial  and 
trading  relations,  the  American  people  exhibit  a 
very  high  degree  of  shrewdness  and  sagacity.  It 
can  scarcely  fail  to  strike  an  observer  that,  in  the 
so-called  struggle  between  the  railroads  and  the 
people,  each  j)arty  has  in  the  past  substantially 
obtained  pretty  much  what  it  wanted  and  was 
entitled  to  have.  .  .  .  The  i)eox)le  were  deter- 
mined to  have  low  rates;  and  it  soon  became  appar- 
ent that  they  could  get  them,  if  they  permitted  the 
railroads  themselves,  within  rational  limits,  to  work 
out  the  problem  in  their  own  way.  They  enjoyed, 
prior  to  the  passage  of  the  interstate  commerce  act, 
the  benefit  of  low  rates  and  a  good  service.  A 
reasonable  modus  mvencU  had  been  arrived  at,  and 
the  great  bulk  of  the  community  was  fairly  well 
satisfied.  In  the  writer's  opinion,  the  experience  of 
the  i^ast  affords  the  best  key  to  the  future;  and  what 
has  happened  before,  in  connection  with  the  rail- 
road situation,  is  likely  to  happen  again.  If  this  be 
so,  the  new  legislation  would  aj^i^ear  calculated  to 


AND  GOVERNMENT  CONTROL.  61 

challenge  the  vigilance,  but  not  necessarily  to 
excite  the  alarm,  of  the  foreign  investor."* 

Rates,  to  be  equitable,  must  be  self -adjustive ;  must 
conform  to  their  environment ;  must  be  based  on  the 
proj)erty  of  the  carrier,  and  the  traffic  handled. 
"The  more  the  attempt  is  made  to  control  the 
rates  of  traffic  by  statute,  the  higher  the  rates 
charged  must  be,  because  it  is  very  plain  that  the 
rates  on  railways,  which  have  a  small  traffic,  can 
not  be  reduced  by  statute  to  the  level  of  those 
which  have  a  heavy  traffic,  unless  the  State  takes 
them  and  operates  them  at  a  loss ;  and  therefore 
it  follows  of  necessity  that  statute  interference  can 
only  end  in  an  advance  of  the  low  rates  now  charged 
on  the  lines  having  a  heavy  traffic  to  the  higher  rates 
of  the  lines  having  a  small  traffic,  if  the  statutes 
do  not  prove  to  be  inoperative. "f 

The  principles  of  transportation,  and  the  competi- 
tion of  carriers,  occupy  the  attention  of  writers  and 
publicists  more  and  more,  as  the  relation  of  the 
subject  to  the  internal  commerce  of  the  country 
becomes  more  and  more  apx^arent.  The  capable, 
the  superficial,  the  ignorant,  and  the  vicious,  alike 
have  a  word  to  say.  A  recent  writer:]:  devotes  a 
volume  to  the  comj^etitive  practices  of  railroads. 
He  sees  no  cure  for  the  petty  acts  of  injustice  he 
chronicles,  except  legislative  interference.  It  is 
very  much  like  devoting  a  book  to  the  disputes  of 


*Jolm  Swanu,  M.  A.,    "An  Investor's  Notes  on  American  Eail- 
ways,"  page  183. 

f  Edward  Atkinson,  "  The  Distribution  of  Products,"  page  309. 
X  A.  B.  Stickney. 


63  RAILWAY  RATES 

boys ;  boys  are  not  always  truthful ;  boys  will  some- 
times light;  boys  are  not  actuated  by  an  exalted 
sense  of  justice  in  every  case.  Therefore,  lock  up 
the  boys,  or  appoint  tribunals  to  supervise  their 
affairs.  What  kind  of  men  would  such  boys  make  ? 
Similar  interference  in  the  affairs  of  men  destroys 
their  manhood.  It  is  called  "coddling."  In  pass- 
ing judgment  on  the  affairs  of  railways,  men 
oftentimes  make  the  mistake  of  confounding  acts 
with  conditions;  mistake  incidents  for  princij^les. 
On  these  mistakes  they  found  systems,  or  tear  them 
to  jneces.  To  change  a  method  of  business  because 
its  working  is  not  perfect,  is  very  much  like  oblit- 
erating the  sun  because  it  has  spots  on  its  face; 
like  imj)risoning  a  jDopulation,  or  disfranchising  it, 
because  particular  men  are  hot-headed,  foolish,  or 
dishonest. 

It  is  a  favorite  assertion  of  writers,  as  I  have 
already  noticed,  that  carriers  should  derive  an 
equal  profit  from  all  their  business.  "It  seems 
impossible  that  any  set  of  men  could  become  so 
befogged  by  a  form  of  words  as  to  supx^ose  that  it 
was  profitable  for  a  railway  to  haul  a  ton  of  freight 
five  hundred  miles  at  substantially  the  same  price 
as  for  hauling  it  two  hundred  miles,  yet  a  reference 
to  the  tariffs  of  these  railways  would  tend  to  show 
that  such  is  the  fact.'"^  Doubtless  the  profit  is 
less  for  the  long  distance,  but  if  it  is  all'the  traffic 
can  pay,  and  if  there  is  a  margin  in  it  over  operating 
expenses,  the  transaction  is  right  and  proper.  The 
margin  of  profit,  whatever  it  is,  inures  indirectly  to 

*  Stickney's  "  Railway  Problem,"  page  52. 


AND  GOVERNMENT  CONTROL.  63 

the  benefit  of  the  short-haiil  shipper.  It  would  not 
make  the  rate  of  the  latter  smaller  to  have  the 
carrier  refuse  the  less  productive  business.  AVhat- 
ever  profit  he  derives  from  it,  helps  to  j)ay  interest 
on  the  capital  invested,  helps  to  make  the  railroad 
profitable,  and,  consequently,  to  multiply  railroads. 
The  business  would  not  be  done  if  attended  with 
loss. 

So  long  as  values,  rather  than  bulk,  determine 
the  measure  of  commercial  profit,  so  long  will  it  be 
impossible  for  carriers  to  frame  a  tariff  that  will  dis- 
tribute its  burdens  alike.  Such  time  will  never 
come.  This  is  why  the  cost  of  a  railroad,  or  the 
amount  of  its  capital,  has  little  or  no  influence  in 
fixing  the  rate.  Rates  adjust  themselves  to  the 
thing  carried,  and  not  to  the  tools  of  the  carrier. 
Hence,  watering  the  stock  of  a  railroad  does  not 
affect  its  rates.  * 

A  theory  more  or  less  regarded  is,  that  the  rate- 
making  power  of  railroads  should  be  sex)arated  from 
the  rate-maintaining  power,  f  This  would  be  true  if 
rates  did  not  adjust  themselves  naturally.  A  rate 
that  may  be  moderate  this  week,  may  be  high  or 
low  next  week.  The  i^urpose  sought  by  the  sej)ara- 
tion,  is  the  j)revention  of  rate-cutting,  undue  com- 
petition, x^revention  of  strife.  A  better  remedy  is 
to  be  found  in  permitting  railroads  to  enter  into 

*"  Watered  stock  and  bonds  can  not  affect  the  charge  for  trans- 
portation in.  any  manner." — Edward  Atkinson,  "  The  Distribution  of 
Products,"  page  259. 

\  Vide  circular  of  Aldace  F.  "Walker,  Chairman  Interstate  Com- 
merce Railway  Association  of  railroad  companies. 


G4  /i'.t/AU'.t  )'  liATKS 

contracts  to  pool  tlinir  compt'titiv*'  business,  Tli:it 
is  the  nietliotl  of  proceduie  in  other  countries.  It 
shouhl  ))e  here.* 

Not  only  do  the  roiuls  of  England  and  the  conti- 
nent nKik(^  pools,  })ut  tlie  use  of  preferential  rates  is 
universally  recognizecl  as  necessary  and  l)eneHcial.t 

To  separate  the  rate -making  power  from  thf 
rate -maintaining  power,  is  to  separate  the  body 
from  the  mind,  to  i)revent  concerted  action,  llexi- 
bility,  facility,  knowledge  of  the  situation.  No 
one  save  the  carrier  can  fullill  the  duties  that  at- 
tach to  the  power  to  make  rates.  He  is  in  ilaily 
and  hourly  contact  with  shippers.  A  iimiedy  for 
the  evils  of  rate-cutting  is  not  in  taking  the  busi- 

*  Those  who  arc  able  to  jiid^c  believe  tliat  the  law  of  the  United 
States  prohibiting  pooling,  if  not  repealed,  will  have  the  effect  to 
bring  about  a  eonsolidalion  of  all  the  railroads  in  the  countrv  ;  unless, 
indci'd,  railwiiy  owners  tind  some  praelieal  means  of  .avoiding  it,  i.  e., 
of  oprrating  their  roads  aecording  to  the  real  interests  and  wanl-s  of 
the  country. 

fThus,  the  rate  per  ton  on  meat  from  Liverpix)l  to  London  is 
25s.,  while  it  is  4.3s.  from  London  to  intermediate  points.  To  the 
local  mind  this  is  aggravated  by  the  fact  tliat  the  smaller  rate  is 
on  imported  meals.  Another  instance  is  the  tariff  on  sugar  from 
Greenofk,  at  a  rate  of  l.OOd.  per  ton  per  mile,  while  from  London 
it  is  2.i;Jd.  This  last  was  made  a  matter  of  complaint  to  the  gov- 
ernment of  Great  Britain.  The  conclusions  of  the  latter  were  Jis 
follows  :  "It  does  not  appear  to  your  committee  that  such  a  re- 
sult" (as  the  closing,  namely,  of  southern  markets  to  Greenock 
sugar  for  the  benefit  of  London  refiners),  "  would  be  either  just 
or  reasonable.  .  .  This  competition  can  not  but  be  advantageous 
to  the  public.  That  Greenock  sugar  refiners  .should  be  in  the  same 
market  as  the  sugar  refiners  of  London,  while  it  may  be  a  grievance 
to  London  refiner-s,  must  be  an  advantage  to  Greenock  refiners, 
and  can  not  be  a  disadvantage  to  buyers  of  sugar."  —  W.  M. 
Acworth,  ^I.  A.,  "  The  Railways  and  the  Traders,"  pages  14,  15. 


AND  OOMSRNMENT  CONTROL.  65 

ness  out  of  his  liauds,  ])ut  in  permitting  reasona- 
ble combiiiiitions  between  carriers,  sanctioning  such 
combinations  ])y  hiw,  and  enforcing  tliem  by  x^enal- 
ties,  such  as  those  imposed  l)y  the  interstate  com- 
merce hiw  of  tlie  United  States  for  disregarding 
its  requirements.  It  is  probable  tliat  a  central  tri- 
bunal, composed  of  the  local  traffic  managers  of 
the  railways  interested,  having  the  power  to  make 
or  amend  rates,  would  work  well.  But  it  must  be 
so  located  and  constituted  as  to  be  in  hourly  con- 
tact with  those  who  use  the  rates  it  makes,  other- 
wise they  will  not  represent  the  requirements  of 
either  the  carrier  or  his  patron. 

The  rates  of  railroads  represent  the  adjustment  of 
a  part  to  the  whole.  The  details  of  this  adjustment 
can  not  ])e  explained  any  more  than  any  other 
natural  phenomenon.  The  rate  is  an  incident 
merely,  a  link  in  a  chain  of  transactions,  and  ad- 
justs itself  within  its  envircjument  as  unreservedly 
as  the  atmosphere  conforms  to  its  si)liere,  fitting 
like  a  glove,  yet  not  bearing  perceptibly  upon  any 
particular  i^art.  So  long  as  a  railroad,  or  group  of 
railroads,  does  not  possess  the  monopoly  of  a 
product  and  its  substitutes,  interference  is  posi- 
tively harmful. 

Interference  in  commercial  affairs  2)recipitates 
evils  worse  than  those  sought  to  be  remedied. 

There  is  no  patent  way  for  ascertaining  what  a 
rate  should  be;  the  power  to  determine  it  is  not 
easily  ac(piired.  It  must  be  such  as  to  foster  the 
growth  of  the  product,  and  at  the  same  time  afford 
the  carrier  a  prolit.     Both  objects  must  be  attained. 

5 


6fi  RAIL  WAV  IIATKS 

If  left  fn'P  to  adjust  tlifinselves,  rales  will  coiiforni 
to  these  c'oii(liti<jiis  witli  the  ])recisioii  of  a  mathe- 
matical demonstration.  The  process  is  one  of  evolu- 
tion, of  natural  adjustment.  However,  man's  work, 
here  as  elsewhere,  is  not  perfect,  but  it  apjjroxi- 
mates  perfection.  Ilis  success  is  dependent  upon 
his  industry,  experience,  and  ])readth  of  knowledge. 
When  he  errs,  he  will  quickly  learn  the  fact  from 
those  about  him;  from  the  shipper  or  the  carrier. 
His  errors  injure  the  carrier  as  much  ;is  they  do  the 
l)atrou.  The  efTiciency  of  traffic  managers  is  not 
uniform.  Some  come  much  nearer  than  others  to 
the  measure  of  their  duty.  However,  the  mistakes 
that  are  made  are  not  permanent.  The  necessities 
of  trade  compel  their  daily  reconsideration  and  re- 
adjustment. Out  of  this  evolution  there  comes 
equity;  a  tariil"  in  which  every  interest  is  con- 
sidered. 

Those  wiio  make  rates  come  in  hourly  contact 
with  the  j)roducer,  merchant,  and  consumer.  Out 
of  this  interchange  of  views  the  truth  is  evolved, 
errors  are  corrected,  omissions  remedied,  every 
interest  reconciled.  The  work  is  cooperative, 
economic. 

Those  who  formulate  rates  may  not  always  be 
aware  of  the  facts  underlying  them,  but  they  are 
facts  nevertheless.  Men  oftentimes  obey  a  law  while 
thinking  they  lead.  This  is  true  of  carriers.  The 
aggregate  number  of  men  engaged  in  the  duty  of 
classifying,  i-evising,  and  fixing  the  rates  of  railroads 
constitutes  an  amiy.  Its  bulk  is  made  nj)  of  assist- 
ants, clerks,  and  agents.     They  are,  however,  quite 


AlW  GOVERNMENT  CONTROL.  67 

as  experienced,  patient,  and  discerning,  in  their  way, 
as  the  chiefs  they   follow;  quite  as  necessary  in 
carrying  on  the  business.    They  are  not  clerks,  in 
the  common  acceptation  of  the  term,  V)ecause  each 
one  is  endowed  with  special  knowledge,  talent,  and 
discretion.     This  is  the  rate  force  of  a  country.     No 
body  of  men  less  experienced,  less  wise,  less  discreet, 
less  industrious,  less  in  number,  less  adaptable  in 
their  ways  can  take  their  places.     Tliey  possess  the 
knowledge  and  instinct  of  trade.     They  know  what 
traffic  is  natural  and  p()ssil)le  to  a  section,  what  is 
not;  the  business  that  may  be  encouraged  to  become 
prorita])le,  that  which  can  nevtM-  b(M'om<?  profitable. 
Their  methods  are  simple  an<l  practical,  and  so  long 
as  a  country  conforms  to  commercial  usages  and 
principles,  rather  than  political  emergencies,   they 
will  continue  to  be  followed. 

Rates  are  based  on  barter.  A  traffic  that  affords 
the  carrier  gain  is  sought,  but  not  at  the  expense  of 
more  profitable  business.  They  follow  in  their 
natural  order. 

The  issuance  of  a  special  or  discriminatory  rate 
does  not  involve  any  obligation  or  understand- 
ing. The  favor  is  not  a  particular  one.  The 
profit  that  enures  from  it  accrues  to  the  com- 
munity. Its  purpose  is  to  create  trade  that  would 
not  otherwise  exist,  to  increase  production,  to  lessen 
cost,  to  stimulate  consumption,  to  benefit  mankind. 
No  business  is  ever  done  that  involves  a  permanent 
loss.  A  profit  must  accrue  in  every  case,  directly  or 
indirectly.  Rates  conform  to  circumstances.  They 
fluctuate.     If  the  necessity  of  the  situation  calls  for 


CjS  liAJLWA  r  RATKB 

low  rates,  we  liave  low  rates.  It  is  not  necessary 
that  the  h'gislature  should  interfere  to  secure  them. 
The  process  is  natural  and  inevitable.  So  lon^  as 
the  rate  afTords  the  carrier  a  measure  of  profit,  he 
will  adapt  himself  to  it,  if  tlie  circumstancrs  of 
trade  requires  it,  piecing  out  tlu^  poor  with  something 
better.  If  liis  income  as  a  whole  is  sufli<i<'iit,  liis 
pro}>eiMy  will  be  j)rospei-ous.  If  it  is  not,  it  will  be 
depressed;  and  as  it  is  prosperous  or  otherwise,  so 
will  other  interests  be.  The  b(md  of  sympathy  is 
complete.  \V(i  cannot  cut  an  artery,  or  deny  any 
part  of  our  ))ody  its  just  proi)oi-tion  of  food,  with- 
out weakening  the  whole.  So  a  great  interest  can 
not  be  cri])pled  ))y  the  State  witlmiit  oIIki-  iiilrrests 
l)eiiig  crippled. 

Wherever  competition  is  free,  the  rates  of  car- 
riers will  ])e  such  as  to  fMcililate  transportation, 
to  increase  pioductioii  and  consumi)tion.  Why? 
Because  competitive  influences  overlook  nothing. 
No  interest  is  too  small  or  too  unimportant  for  it  to 
notice  and  provide  for.  Traffic,  that  will  only  pay 
the  carrier  a  molecule  of  prolit,  will  be  attended  to 
as  conscientiously  as  if  involving  millions;  a  traffic 
that  will  afford  a  margin  of  profit,  be  it  ever  so 
slight,  he  accepts  with  eagerness,  if  it  is  all  it  can 
pay.  No  one  is  harmed  thereby,  but  both  the  com- 
munity and  the  carrier  are  benefited.  Out  of  these 
small  ventures  a  profitable  trade  oftentimes  grows. 
The  commerce  of  the  world  has  grown  up  in  this 
way.  Particular  items  of  traffic  can  not  be  consid- 
ered by  themselves,  but  must  be  viewed  in  their  rela- 
tion to  the  whole.     The  fact  that  shippers  are  not 


AND  GOVERNMENT  CONTROL.  69 

charged  relatively  the  same  rate  per  mile,  grows  out 
of  forces  beyond  the  control  of  the  carrier.  He 
would  gladly  charge  everyone  the  same.  The  dis- 
crimination he  is  compelled  to  exercise  stimulates 
production,  cheax)ens  cost,  increases  consumption. 

The  rivalry  of  carriers  also  benefits.  It  begets 
better  service,  better  roads,  better  cars,  quicker 
transportation,  greater  safety. 

Unifonnity  of  rates  must  not  be  looked  for,  except 
in  C()nf(^rmity  with  the  markets  they  supx)ly.  Each 
company  must  be  considered  by  itself.  A  traffic 
thatnuiy  be  carried  profitably  upon  one  road,  it  may 
be  impossible  to  carry  at  all  on  a  neighboring  line. 
Cost  of  operating  is  never  the  same.  It  may  be 
greater  in  December  than  in  June;  more  in  March 
than  October;  more  on  one  section  of  a  road  than 
another.  On  one  day  the  load  may  l)e  light,  the 
next  day  it  may  l)e  heavy;  facilities,  terminals,  labor, 
exi^euses,  climate,  and  innumerable  other  things 
affect  cost.* 

*  "  The  underlying  principle  governing  the  fixing  of  rates  is  that 
the  railroad  company  is  not  meiely  ;i  comnion  carrier,  but  is  also  the 
owner  of  a  ro(ulwitij,  and  it  charges,  not  only  for  the  work  of  nioviug 
freight  as  a  common  carrier,  but  also  toll  for  the  vne  of  its  roadway. 
Now,  in  the  United  States  it  requires  nearly  forty  per  cent,  of  the 
receipts  to  pay  the  loll  on  this  roadway,  that  is  the  interest  on  the 
investment,  and  within  that  forty  per  cent,  the  railroads  have  great 
latitude  in  making  their  charges.  The  other  sixty  per  cent,  goes  to 
pay  the  cost  of  operating  the  r>ad;  that  is  to  say,  of  moving  and 
handling  the  freight.  In  making  competitive  rates,  therefore,  the 
question  is  presented  to  the  railroad  manager  whether  he  can  reach  a 
certain  business  at  certain  rates,  and  if  he  tiuds  he  can  not  get  his 
forty  per  cent,  on  that  busines.s,  he  takes  twenty  or  even  ten.  .  .  . 
.     .     The  higher  charges  made  upon  some  classes  of  freight  com- 


70  RAILWAY  RATES 

It  is  a  luvoiiic  tlieoiy,  and  one  we  meet  with 
every  day,  that  iiiaii;ii;t'i-s  of  lailroads  may  build  uj) 
a  town  or  destroy  it  at  will.  The  theory  is  not  true, 
but  is  carefully  })tMiH'tuate(l  by  those  who  seek  to 
breed  distrust  of  laihvay  inetliods.  Managers  do 
not  fix  rates  any  nioie  than  brakenien.  They  record 
them  merely.  Conditions  (h*terniine  the  status  of 
cities,  as  they  do  of  men.  Tra(h^  centers  are  deter- 
mined by  sources  of  supply  and  distribution.  A 
town  at  tlie  junction  of  two  or  more  roads  ought, 
naturally,  to  possess  an  advantage  therefrom.  It  is 
in  liai-mony  with  just  laws  that  it  sliould.  If  its 
growth  is  stimulated  by  comiM'titive  juactices,  so 
much  the  better,  not  only  for  the  town,  but  for  the 
community. 

Men  will  never  be  able  to  legishite  rightly  for 
railroads  until  they  learn  that  the  interests  of  the 
people  require  that  these  carriers  should  l)e  allowed 
the  same  hititude,  in  collecting  and  distributing  the 
products  of  a  country,  that  private  individuals  are. 
The  carri«'r  does  not  determine  the  product  or  point 
of  distribution.  Natural  causes  do  this.  The  dis- 
tinction thus  created,  liowever,  affords  a  fine 
opportunity  for  the  maliciously  inclined  to  excite 
suspicion,  create  jealousy,  foster  animosities,  stir 
up  the  ignorant.  Whenever  a  product  or  a  town 
no  longer  responds  to  a  natural  requirement,  its 
decline  is  certain  and  inevitable,  and  while  caiTiers 
may  temporarily  stay  its  downward  progress,  they 


pensate  the  railroad  companies  for  the  lower  charges  upon  others. 
They  must  be  regulated  according  to  what  the  articles  will  l)ear." — 
AlbcrL  Fiuk,  before  Committee  ou  Commerce,  February-,  1882. 


AND  GOVERNMEXT  COXTEOL.  71 

will  not  attempt  to  do  so  when  they  discover  the 
nature  of  the  load  they  are  carrying.  Neither  cities 
nor  carriers  find  occupation  or  place  longer  than 
they  respond  to  a  natural  want  of  the  community. 
Trade  centers,  maintained  by  rival  markets  and  the 
influence  of  competitive  carriers,  are  valuable  to  a 
community.  Those  maintained  by  government 
bounty  are  not.  Tlie  community  in  one  case 
receives  the  benefit  of  a  hxtal  tax.  In  the  other,  a 
neighborhood  is  made  the  beneficiary  of  a  general 
tax.  Similarly,  this  is  a  distinction  l)etween  private 
and  public  ownci-ship  of  raili'oads. 

In  America,  competitive  influences  have  from  the 
start  had  free  play  in  the  building  of  railroads, 
and  the  adjustment  of  rates.  To  this  fact  we  are 
indebted  for  our  unexampled  commercial  wealth. 
England  more  nearly  resembles  us  in  this  resi)ect 
than  any  other  country.  Practices  elsewhere  are 
generally  alike;  Germany  is,  in  tlie  main,  typical 
of  the  whole.  Its  system,  like  its  army  and  civil 
service,  is  a  cast-iron  one:  "So  far  as  they  can, 
they  have  eliminated  competitive  rates  altogether. 
America  has  given  free  ])lay  to  competition.  Eng- 
land has  taken  a  position  midway  between  the  two. 
.  .  Every  time  we  (the  English),  yield  to  German 
ideas,  and  move  away  from  the  American  principle 
of  giving  competition  full  s\\ing,  we  may  do  in- 
justice between  two  competitors,  whether  they  be 
individual  traders  or  rival  towns,  but  we  unques- 
tionably raise  the  general  average  of  English  rates."* 


*W.   M.   Acwortb,   M.  A.,    "The   Ilailways  and   the  Traders," 
page  227. 


72  h'AI/.W'AV   h'ATh'S 

In  Aiiiciiai,  iiclioii  lias  lieretofore  been  impersonal ; 
has  been  responsive  to  the  natural  conditions  of 
tia(h^  lixcd  by  the  world,  (ifiiiiaiiy  has  tried  to 
make  the  world  respond  to  merely  local  desires— to  an 
uutocracy,  Natnrally,  she  has  not  been  successful. 
Her  action  lias  not  been  materially  diirercnt  from 
other  ^governments  ownin^i^  and  operating  railroads. 
The  interests  of  a  community  and  the  carriers 
who  supply  it  are  on*',  and  while  they  will  have 
many  differences,  many  lirart-burninirs,  tliry  must 
mututdly  supjxjrt  and  2»rot('ct  each  ot  her.  ( )n»'  can 
not  be  cripi)led  without  injury  to  the  otlier.  Jjeft 
to  their  own  devices,  carriers  will,  so  far  as  thry 
can,  adjust  rates,  so  that  every  interest  shall  d«;- 
rive  some  advantage.  That  is  the  linnt  of  their 
l)ovver.  Interests  that  can  not  ccmform  to  this  just 
requirement,  without  tienchingupon  the  just  i)rolits 
of  others,  are  abnormal,  aitillcial,  hurtful  to  a  com- 
munity. Business  that  can  not  be  lumdled  under 
such  circumstances,  should  be  allowed  to  die  out. 
To  se«d\.  to  ])erpetuate  it,  is  to  seek  to  fasten  a  l)ur- 
den  on  the  community.  But  this  is  just  what  gov- 
ernments do  whenever  they  meddle  in  commercial 
affairs.  The  votes  of  the  improvident  town  are 
quite  as  potent  as  those  of  the  prosperous  town. 
Governments  carry  out  in  trade  the  principles  they 
endeavor  to  enforce  in  their  courts,  namely,  abso- 
lute equality,  without  reference  to  capacity  or  fit- 
ness. White  and  brown  sugar  are  to  them  the 
same;  capal)le  and  incapable  men  are  alike  their 
children.  They  place  the  burdens  of  the  weak  on 
the  strong,  and  thus  render  all  weak. 


AND  GOVERNMENT  CONTROL.  73 

The  rtites  of  railroads  react  naturally  when  too 
high.  But  reduction  will  be  dependent  \\\)o\\  ability 
to  heighten.  Obligation  and  privilege  must  go  hand 
in  hand.  It  is  not  necessary  that  the  carrier  should 
have  an  order  to  reduce  rates.  His  interests  are 
more  potent  to  move  him  than  any  statute;  his 
instincts  more  facile  than  the  reason  or  logic  of 
men. 

America  bases  her  rates  on  the  value  of  the  service; 
the  ability  of  the  traffic  to  pay.*  The  Germans  have 
sought  to  base  them  on  cost  entirely.  They  have 
made  the  experiment  under  the  most  favorable  cir- 
cumstances. The  unity  of  the  country,  and  the 
exceptionally  high  character  of  ils  civil  service,  Uiade 
this  au  exceedingly  favorable  held  for  demonstrat- 
ing theories  of  this  nature.  But,  notwithstanding 
her  exceptional  service  and  autocratic  i)Ower,  it  was 
found  impossible  to  operate  railroads  except  in 
harmony  with  the  laws  of  trade,  the  sui^plying 
of  markets  from  the  cheapest  sources  and  by  the 
cheapest  routes.  The  desire  of  Germany  to  build 
uj)  distinctively  German  railroads,  fostering  dis- 
tinctively German  interests,  failed.  The  system  was 
accordingly  changed,  but  begrudgin^ly,  and  in  that 
retroactive,  combative  w:iy  so  peculiar  to  govern- 
ments— and  crabs!  However,  natural  condit*  ns 
have  gradually  re-asserted  themselves,  until  to-dny 
fifty  per  cent,  of  the  tonnage  of  Germany  is  carried 
under  special  arrangements,  preferential  rates,  con- 
tracts, agreements,  and  understandings.     The  Ger- 


*Cost  is  considered  to  this  extent,  that  the  rate  must  at  least 
equal  the  cost. 


74  HAIL  WAV  RATES 

mans  found  tliat  a  tariff  based  distinctively  on  cost 
was  an  impossibility.  The  competition  of  carriers  and 
iiiarkt'ts  forbade  it.  A  well-known  writer  on  the 
subject "  says  tliat  a  tarill"  l)a;s«'d  on  cosl  would  result 
in  three  things:  "  Either  of  which  would  ui»set  the 
business  of  the  country:  1st.  Then;  would  be  little  or 
no  classitication  of  fi'ci^hts.  Grain,  lumber,  coal, 
iron,  shoes,  dry  ^oods,  groceries,  drugs,  and  chemi- 
cals, would  all  have  to  ])ay  near  about  the  same  nite 
per  hundred  i)ounds  ]»er  mile,  and  that  rate  would 
have  to  ])e  soiuetliiiig  like  the  average  of  the  present 
rates  charged  iipou  the  dilbMent  classes  of  freights. 
The  high«M- classes  of  freight  would  be  a  good  deal 
lowered,  and  the  lower  classes  would  be  materially 
raised.  The  result  would  be  that  cheap  and  heavy 
products  could  be  no  longer  transported  over  the 
distance  that  they  are  now  carried.  2d.  The  nites 
on  through  freight  would  have  to  be  proportioned 
very  nearly  to  the  distance  hauled;  the  rate  from 
Chicago  to  Boston,  for  instance,  would  be  materially 
higher,  and  the  rate  from  Chicago  to  Baltimore 
materially  lower,  than  the  rates  from  Chicago  to 
New  York,  because  there  is  difference  enough  in 
distance  to  make  a  difference  in  cost.  3d.  Roads 
having  lowest  grades  and  most  favorable  alignments 
would  have  lower  rates  than  their  competitors,  and 
would  monopolize  the  business,  to  the  entire  exclu- 
sion of  those  lines  which  traverse  more  difficult  and 
expensive  territory,  and  upon  which  the  cost  of 
transportation  was  greater.  And  the  tide  once 
turned,  the  evil  w^ould  multiply  itself;  for  the  rates 


*E.  P.  Alexander. 


AI^D  GOVERNMENT  CONTROL.  75 

would  decrease  rapidly  on.  the  favored  roads,  with 
the  increase  of  business,  and  would  increase  on  the 
unfortunately  located  roads,  with  the  decrease  in 
volume  of  their  freights,  until  the  latter  wonld  be 
left  witli  nothing  but  their  local  business  to  support 
them,  which  would  then  have  to  be  advanced  to  the 
highest  figures  })ossiblH.'' 

Dissimilarity  of  cost  ol"  operati(^n  and  ccuistruction 
would  prevent  cost  being  made  the  l^asis  of  rates,  if 
other  and  moi'e  potential  causes  did  not  intervene. 
"The  average  cost  of  transpoitation  ovin-one  line  of 
railway  may  as  much  exceed  that  over  another, 
which  reaches  the  same  comi)etitive  point  or  region, 
as  the  average  cost  of  transi)()rtati<>n  over  the  latter 
exceeds  the  average  ccjst  of  water  carriage."  '*  Those 
that  would  base  rates  on  cost  go  hand  in  hand  with 
those  who  believe  that  all  rates  should  Ix^  relatively 
the  same.  The  latter  believe  (or  profess  to  believe) 
that  rates  based  on  mileage  are  alone  equitable;  that 
they  prevent  discrimination;  that  they  treat  all 
alike;  that  everyone  pays  according  to  the  distance 
he  travels,  or  the  length  of  line  over  which  his  goods 
are  hauled.  Such  a  rate  is,  however,  an  impossi- 
bility. A  tariff  thus  predicated  might  be  possible 
within  the  boundaries  of  a  small  and  isolated  coun- 
try. But  not  elsewhere.  Mathematically  arranged, 
rates  for  near-by  freight  would  not  be  enough  to 
cover  cost  of  carriage  and  terminals,  or,  if  made  to 
cover  these  expenses,  would  soon  reach  a  i:)oint  where 
they  could  not  be  further  increased,  in  which  case 
business  would  have  to  ])e  abandoned,  or   a    less 


*  W.  D.  Dabuuy,    'The  Public  Regulation  of  Railways,"  page  115. 


76  AM//,  ir.l  )'   ILITKS 

rate  relatively  exacted.  The  latter  Will  he  eoiiceded 
in  every  case  where  carriers  ar«'  left  iiiihainiiicled. 
An  e(iuital)le  tariff  may  Im*  illiistrat«Ml  in  this  way: 
Between  Geur«^et()wn  and  Norfolk,  fonr  hundrrtl 
and  twenty  miles  apart,  the  rate  on  wheat  and  tlonr 
at  ten  miles  will  he  tiftylive  and  seven-tenths  per 
cent,  of  the  whole  rate;  at  lifty  miles  it  will  he  ninety 
and  one-tenth  \»'i'  cent,  of  tiie  whole  rate;  at  eighty 
miles  it  will  h*-  th**  same  as  for  the  whole  distance. 
The  i-easons  are  ohvions.  The  roads  must  eitln-r  re- 
fuse to  do  husintvss  near  (T«'ori;»*town,  •)r  char^^e  a 
sufficient  rat«'  to  ]»ay  cairiag*}  and  terminal  (•har<;«'S. 
This  they  tlo.  The  i)eoi)le  near  Geori;etown  <lo  not 
suifer  in  any  way  hy  the  arrangement;  th«'y  wouM  not 
get  a  lower  rate  if  the  husiness  outside  tlieir  restricted 
circle  were  refused  uidess  it  paid  a(;orresiM)n<ling  iiite. 
The  impra<'ticahility  of  a  progressive  tarilT  is 
well  undtMstood  hy  those  vei-st'd  in  su«'ii  matters. 
It  not  only  restricts  tiie  moveiin-nt  of  liallic,  hut 
retards  railway  development.  *     The  long  and  short 

*  Arlliur  T.  ILullcy,  referring  l<>  tliis  pliase  of  tlio  subject,  .says: 
"  Supposuit  isjKiuestion  wlietluTarojul  can  l)cl)uilnlirt)iii^li  aeoiintry 
district,  lyiiii:  Ix'tween  two  largo  eitie.s,  whicli  liave  llie  IjcnctU  or 
water  communieation,  wliile  the  inlerveuiiig  (li:itrict  lias  noi.  The 
nite  l)etween  tliese  points  must  be  made  low  to  meet  water  com- 
petition; so  low  that  if  it  were  applied  lo  the  whole  business  of  the 
road  it  would  make  it  ijuite  unprofitable  On  the  other  hand,  the 
local  business  at  intermediate  points  is  so  small  that  lliis  alone  can 
uot  support  the  road,  no  matter  how  low  or  how  hi^dl  the  rates  are 
made.  So  that,  in  order  to  live  at  all,  the  road  must  .secure  two  dif- 
ferent things  —  the  high  rates  for  its  local  trafRc,  and  the  large  traftic 
of  the  through  points  which  can  only  l)e  attmcted  by  low  rates.  If 
the  community  is  to  have  the  road,  it  must  pcnnit  the  discrimination." 
— "  liiiilroail  Transportation,"  page  l\o. 


AND  GOVERNMENT  CONTROL.  77 

haul  clause  (progressive  feature)  of  the  Interstate 
Commerce  Act  of  America,  by  wliich  a  railroad  is 
prohibited  from  carrying  passengers  or  freight  lor  a 
particular  distance  at  a  lower  rate  than  it  charges 
for  a  slioiter  distance,  is  happily  qualiiied  by  the 
statement  that  the  prohibition  applies  only  wli«*re 
the  circumstances  and  conditions  are  the  same.  Tlie 
law  is  defective  in  this,  tliat  it  does  not  give  suffi- 
cient discretion  to  those  in  charge  of  the  traffic  of 
raihoads.  It  permits  "a  gr»'ater  ciiargH  on  the 
shorter  haul,  when  tiie  conditions  and  circumstances 
seem  to  justify  it,  even  permitting  what  may  be 
called  a  suspension  of  the  law  in  spi'cial  cases,  if,  in 
\\\Q  opinion  of  the  commissicm  appointed  to  regu- 
late interstate  traffic,  it  should  seem  after  investiga- 
tion lo  bereasonal)le  todoso."*  Getting  an  opinion 
from  the  conunission,  crowded  as  it  is  with  cases,  is, 
however,  like  sending  a  thousand  mih'S  for  a  ])usy 
doctoi'in  a  case  of  lil'r  and  death.  The  delay  it  neces- 
sitates in  agieat  measuie  destroys  the  value  of  the 
conce.ssion.  ('arriers  should  have  the  light  to  make 
such  charge  as  in  their  jiidgiueut  is  necessary.  If 
afterwaids  the  commission,  on  reviewing,  esteem  it 
improper,  its  further  use  may  be  |ii-ohil)ite(l.  If  aj)- 
jilication  must  be  made  in  every  case  calling  for 
such  concession,  they  would  ])e  so  numerous  that 
theji' adjudii'ation  singly  l)y  the  c<mimission  would 
l)e  ini[)ossible.  Requiring  the  consent  of  the  com- 
mission in  advance  in  such  cases,  is  tantamount  to 
prohibiting  all  trallic  falling  under  such  regulation. 


*"F'<)urth  Annual    Report.  lotcrstute   Commerce    Commission," 
page  44. 


78  liAILWAV  HATES 

Competition  and  cirnimstances  of  a  liko  nature  are 
recognized  abroad  as  justifying  discriininatoiy  r.ites 
by  railroads.  They  are  professeilly  so  regaidt-d  l)y 
the  governtnent  in  America,  l)nt  we  are  disposed  to 
surround  our  carriers  with  sucii  restrictions  and  de- 
lays as  to  greatly  impair  their  usefulness,  and  gi'eatly 
restrict  and  injure  the  business  of  the  country. 

In  reference  to  the  local  business  of  railroads, 
the  petty  traffic  that  passes  back  and  forth  on  a  line 
between  stations,  is  a  thing  apart.  The  rates  that 
govern  it,  liowever,  are  distinctly  influenced  by 
those  made  to  cover  the  surplus  of  the  district, 
including  the  through  traffic  that  seeks  a  wider 
outlet.  It  is,  therefore,  assured  of  favorable  condi- 
tions; of  a  rate  that  will  develop  and  maintain  the 
country. 

As  a  general  thing,  local  rates  are  intluenced 
unfavorably  by  lack  of  return  load,  by  a  short 
haul,  by  restricted  use  of  rolling  stock,  by  delay  at 
stations  in  loading  and  unloading,  by  the  limited 
quantity  of  the  traffic  ollered,  and  by  relatively 
increased  expenses  for  handling  and  accounting. 
On  the  other  hand,  they  are  affected  favonibly, 
from  the  standpoint  of  the  shipper,  by  the  constant 
and  intelligent  effort  of  carriers  to  build  up  business 
along  their  lines;  to  make  their  properties  inde- 
pendent and  self-sustaining.  This  leads  them  to 
make  especially  favorable  rates,  wherever  necessary 
to  encourage  new  enterprises,  or  perpetuate  those 
already  in  existence.  They  are  partners  in  interest, 
and  the  regard  paid  is  that  which  such  conditions 
engender.     The  fact  that  it  is  largely  selfish  does 


AND  GOVERNMENT  CONTROL.  79 

not  detract  fioiu  its  value;  on  the  contrary,  it  adds 
thereto  by  insuring  its  i^erjietuation;  by  making  it 
more  sustained,  intelligent  and  discriminating. 
Intelligent  selfishness  is  the  basis  of  commercial 
wisdom  and  energy  —  the  basis  of  commercial 
growth  and  perpetuation. 

Local  rates,  quite  as  much  as  others,  are  based  on 
equitable  grounds,  Pioduction  could  not  thrive 
otherwise.  Wat»'r  does  not  more  surely  seek  a 
lower  level,  than  trade  abandons  a  location  unfa- 
vorable to  it.  Railroads  can  not,  if  they  would, 
maintain  an  inequitable  local  tarilF.  To  do  so  would 
be  to  depopulate  the  country  tributary  to  them. 
Local  rates  must  be  such  as  the  nature  of  the  traffic 
requires  and  in  hannony  with  good  business  nsage 
and  the  customs  that  govern  such  matters.  Every 
carrier  puts  his  patrons  on  an  equality  with  others, 
so  far  as  he  can.  He  aids  them  in  every  way.  But 
it  is  not  a  matter  he  can  wholly  regulate.  Location 
and  adaptation  have  much  to  do  with  it.  If  the 
producer  is  unfavorably  located,  it  is  not  in  the 
power  of  the  carrier  to  remedy  his  lack  of  judg- 
ment. If  the  latter  locates  his  road  wisely,  builds 
cheaply,  and  operates  economically  and  efficiently, 
he  has  done  everything  he  can  to  aid  the  commu- 
nity he  serves.  All  these  conditions  have  been 
observed  in  America.  Our  railroads  are  not  only 
built  more  cheai)]y  than  in  other  countries,  but 
they  are  worked  more  econon)ically.  Their  opera- 
tions, however,  are  not  generally  understood.  Many 
of  our  laws  are  predicated  upon  a  ])elief  that  they 
act  automatically.     The  competition  that  exists  in 


80  AM//.  MM  )'  ILlTh'S 

the  ciinyini^  tiade  of  tli«;  world  i.s  too  suhtlr  to  !>« 
generiilly  aiuilyzed,  too  far-ieacliin^  to  l)e  ^cik-ially 
described.  It  is,  liowever,  universally  felt.  Monop- 
oly among  carriers  is  impossible,  because  cond)ina- 
tion  is  imjxjssible.  Contli(;ting  interests  can  neither 
be  reached  nor  governed.  They  are  too  \vi<le- 
spread,  too  diversified,  too  ind»*linite.  "A  monop- 
oly must  either  be  one  secuifd  by  publi<;  authority, 
or  one  that  rt'siilts  from  tlic  practical  impossibility 
of  competition;  and  in  making  out  the  latter,  it  is 
going  altogether  farther  than  the  common  law  lias 
ever  gone,  to  say  that  competition  is  impossible, 
because  one  mode  of  transportation  has  an  advan- 
tage in  the  public  estimation  over  another.  That 
advantage  is  continually  varying.  It  varies  with 
the  season  of  the  year,  with  the  state  of  trade,  and 
the  particular  objects  which  individuals  wish  to 
accomplish.  It  is  now  on  the  side  of  the  railroads, 
and  now  on  tlie  side  of  otln-i-  means  of  ti'anspoila- 
lioii.  ()iii'  mail  may  wisli  to  m:ik.' a  I(»ng  journey 
with  the  utmost  rapidity,  and  he  can  afloid  to  pay 
the  highest  railroad  fare.  Another  man  is  not  so 
pressed  for  time,  and  he  can  take  the  slower,  and 
perhaps  cheaper,  conveyance  by  water.  One  person 
employs  the  more  expensive  communication  by 
telegraph,  l)ecause  he  is  in  a  hiiny;  another  can  use 
the  cheaper  communication  by  a  letter  dropj^'d  in 
the  jx)st  ofhce,  because  he  is  not  in  a  hurry.  In  short, 
every  mode  of  conveyance  of  jiersons,  or  things,  or 
infonnation,  is  incessantly  engaged  in  competition 
with  other  modes;  and  there  is  no  one  of  them  that 
enjoys  a  monoply,  in  the  only  sense  that  the  com- 


AlW  GOVERNMENT  CONTROL.  81 

mon  law  attaches  to  that  term,  namely,  an  exclu- 
sive privilege  secured  by  public  authority,  or  result- 
ing I'roni  the  practical  exclusion  of  all  competition."  * 
Competition  governs  prices  where  we  least  expect 
it,  and  controls  industries  that  are  apparently  with- 
out rivalry.  It  governs  the  local  rates  of  railroads, 
as  well  as  those  recognized  as  competitive.  A  par- 
ticular district  or  carrier  does  not  exercise  a 
monopoly  in  any  article,  so  long  as  that  article  is 
produced  in  appreciable  quantities  elsewhere.  Nor 
can  the  carrier  exercise  a  monopoly  unfavorable  to 
local  patrons,  so  long  as  others  are  not  governed  by 
similar  coutlitiuns. 


*  George  Titknor  Curtis,  "  Tlu-  Doctrim"  of  Pn-suiiuMl  Dedication 
of  Private  ProiH;rty  to  Public  Use,"  pages  8,  9. 


CHAPTER   IV. 

RAILWAY  EATES — THEIR  BASES  AND  THE  INFLUENCES 
AFFECTING  THEM. 

An  important  factor  in  determining  the  rate  is 
the  attendant  risk  of  handling  the  traffic.  Common 
carriers  are  insurers,  within  certain  prescribed  lim- 
its. The  insurance  covers  loss,  breakage,  and  lire, 
in  the  case  of  goods,  and  accident  and  life,  in  the 
case  of  J3assengers.  In  many  instances  the  risk  is 
scarcely  appreciable — does  not  sensibly  affect  the 
rate;  in  others  it  is  as  marked  as  the  cost  of 
handling.  Whatever  it  may  be,  it  influences  the 
rate  to  that  extent,  and  being  of  universal  applica- 
tion, is  general  in  its  effect. 

The  principles  that  govern  the  making  of  rates, 
while  in  the  main  identical  in  different  countries, 
are  affected  somewhat  by  local  conditions.  In  Eng- 
land and  the  United  States,  two  things,  above  all 
others,  oj^erate:  the  value  of  the  transi)ortation, 
(determined  by  the  thing  transported),  and  the  cost 
of  carriage.  The  value  of  the  service  rendered  is 
generally  the  difference  between  the  value  of  a 
thing  at  the  i^oint  of  shipment  and  at  its  destina- 
tion. ;More  than  this  can  not  be  charged.  If  it 
were,  traffic  would  not  be  offered.  In  determining 
the  cost  of  transportation,  averages  only  can  be  safely 
used.     We  can  not  assume  that  new  business  will 

(SI) 


84  liAfLWA  y  HATES 

cost  less  than  the  average  of  that  which  already 
exists.  A  French  writer,*  however,  disputes  tliis. 
He  thinks  the  lowest  price  at  which  a  carrier 
can  transport  a  unit  of  traffic,  or  ton  of  freight, 
one  hundred  miles,  with  advantage  to  himself,  is 
iiot  the  averaii^e  cost  of  carrying  a  ton  one  hun- 
dred miles,  but  is  the  cost  of  carrying  an  ''addi- 
tional ton"  one  hundred  miles.  lie  says:  "If 
trains  are  run  empty,  the  cost  of  handling  them 
is  a  tritie  less  than  if  they  were  run  full;  but  the 
difference  is  not  large;  and  so  long  as  there  is  not 
traffic  enough  to  compel  an  increase  in  the  number 
of  trains,  the  transjjortation  of  a  ton,  in  addition 
to  that  which  already  exists,  involves,  so  to  say, 
no  additional  expenses.  Even  when  the  number 
of  trains  is  increased,  the  increase  in  the  expense 
is  far  from  being  proportional  to  the  increase 
in  traffic."  Mr.  Colson's  argument  is  more  specious 
than  trustworthy.  No  rate  can  safely  be  made 
that  does  not  assume  that  the  cost  is  equal  to  the 
general  average  for  such  freight.  Any  other  basis 
would  quickly  bankrupt  a  company,  because  it  would 
leave  no  margin  for  the  constant  enlargement  of 
expenses  that  is  going  on.  Not  only  this,  but  j^ro- 
vision  must  be  made  for  a  return  on  the  additions 
to  the  property  that  new  business  engenders.  For, 
while  the  original  cost  of  a  property  is  but  little 
considered  in  making  a  rate,  additions  to  a  property 
are  not  lost  sight  of  in  that  connection.  Thus,  if 
rates  are  unj)rofitable,  no  additions  or  extensions  to 

*C.  Colson,  of  the  Goverumcnt  Council  of  the  French  Railway 
Service. 


AND  GOVERNMENT  CONTROL.  85 

a  i)roperty  will  be  made.  If  they  are  made,  it  is 
because  tlie  rate  on  tlie  business  they  are  intended  to 
provide  for  is  sufficient  to  cover  a  return  thereon. 
To  this  extent,  therefore,  the  cost  of  a  proi^erty 
affects  the  rate.* 

The  large  financial  interest  which  the  French 
government  has  in  its  railways  suggests  to  it  that 
the  rate  shall  not  only  cover  the  cost  of  carriage, 
but  also  a  proi^ortionate  ciiarge  on  account  of  the 
original  investment.  The  French  are  handicapi^ed 
to  this  extent.  The  conditions  in  Fiance  aie  not 
the  same  as  in  the  Unitetl  States,  where  free  railway 
construction  is  XDermitted.  In  explaining  the  French 
system,  Mr.  Colson  says  the  cost  of  transportation 
involves,  not  only  the  expense  of  moving  the  traffic, 
but  also  a  charge  for  using  the  road,  which  charge 
may  properly  be  called  a  toll.  On  this  charge  the 
"additional  ton"  has  but  little  effect,  for  the  cost 
of  the  road  remains  the  same  until  a  very  large 
additional  traffic  necessitates  extensions  and  im- 
provements, and  much  of  the  cost  of  maintenance 
is  affected  but  slightly  by  the  volume  of  traffic. 
Mr.  Colson  claims  that  the  law  of  supply  and 
demand  is  not  free  to  act  in  the  fixing  of  railway 
rates;  that  it  is  restricted  and  trammeled.  The 
supply,  for  instance,  is  represented  by  facilities 
created  by  capital.  But  when  once  cai:)ital  has  been 
invested  therein,  it  can  never  be  withdrawn  from 


*  While  this  applies  generally,  it  does  not  apply  in  every  case. 
Man}'  additions  and  improvements  are  made  to  a  propertj'  with  a 
view  to  cheapening  the  cost  of  operating.  Thus  a  company  whose 
traffic  is  unproductive  may,  by  certain  additions  or  improvements, 
SO  cheapen  cost  as  to  make  its  business  profitable. 


86  JLULWAY  HATES 

that  enterprise,  if  it  ])e  a  failure,  and  i>iit  into  more 
profitable  ventures.  This  is  only  negatively  true. 
If  the  original  cost  of  a  property  determined  tlie 
price  asked  for  service,  the  law  of  supply  and 
demand  would  not  operate  in  fixing  the  rate.  I5ut 
it  does  not.  The  rate  traflic  will  l)ear  and  the  cost 
of  service  determine  finally,  as  in  every  commercial 
transaction,  whether  business  can  be  done  or  not. 
Wherever  railways  are  unprofitable,  other  lines  will 
not  be  built,  and  those  in  existence  will  dwindle. 
Unprofitable  roads  (piickly  adjust  themselves  to 
their  environment,  and  if,  with  the  increase  of  busi- 
ness that  follows  the  introduction  of  every  railway, 
properties  that  are  at  first  unprofitable  are  able  to 
earn  abnormal  returns,  other  lines  will  be  con- 
structed. From  whatever  point  of  view  tlie  subject 
is  considered,  the  law  of  supi)ly  and  demand  oper- 
ates untrammelod  as  effectively  and  inevital)ly  in 
the  case  of  railways  as  in  the  case  of  other  indus- 
tries. But  this  is  only  true  where  railway  construc- 
tion is  free — wherever  railroads  ai'e  owned  by 
private  individuals,  wherever  unrestricted  railway 
construction  is  permitted,  wherever  carriers  are 
allowed  to  make  their  own  rates. 

In  making  rates,  each  company  endeavors  to  make 
the  traffic  it  handles  cover  a  reasonable  return  on 
the  first  cost  of  the  property;  but  its  ability  to  do 
this  is  governed  by  influences  beyond  its  control  or 
that  of  the  shipper,  and  when  traflic  can  not  pay  its 
proportion  of  fixed  charges,  it  is  yet  taken,  if  it  can 
contribute  something,  no  matter  how  small  the 
amount  may  be.  This  is  not  true  of  government 
railroads,  or  of  monopolies. 


AND  GOVERNMENT  CONTROL.  87 

Rate-making  is  a  purely  practical  question.  And 
here  is  where  so  many  writers  and  theorists  fail  to 
understand  the  problem.  It  is  not,  to  them,  coldly 
a  matter  of  business,  a  thing  governed  by  the  same 
l^rinciples  as  the  xiroduction  and  sale  of  turnips;  a 
question  of  barter  and  sale,  of  giving  every  man  his 
due.  They  look  at  it  from  a  sentimental  x)oint  of 
view.  Properly,  however,  the  subject  can  only  be 
considered  from  the  standpoint  of  the  trader.  Only 
on  this  basis  can  railways  be  made  self-sustaining; 
only  on  this  basis  can  those  who  use  them  be  made 
to  x^ay  therefor.  On  any  other  basis  the  load  woidd 
have  to  be  borne,  x^^i'tially  at  least,  by  others.  It 
would  be  class  legislation  of  the  most  unjust  kind. 
Professor  Colin  likens  the  rates  of  railways  to  taxes: 
"All exx)erience  shows  that  railway  rates  are  based, 
not  on  the  cost  of  furnishing  the  service,  but  on 
what  the  x^tirchaser  can  afford  to  pay,  and  ought  to 
X^ay.  .  .  .  The  x^i'o'^lem  at  bottom  is  one  of 
ethics,  involving  those  considerations  of  x^ublic 
policy  and  of  right  and  wrong  which  recur  in  the 
discussions  of  x^roportional  or  x:>rogressive  taxation." 
Because  of  this,  curiously  enough,  he  argues  that 
private  x^ersons  can  not  be  entrusted  with  the  deli- 
cate duty  of  determining  what  the  charge  shall  be; 
that  the  government  only  can  do  this.  It  is  very 
much  like  saying  that  because  air  is  necessary  to 
man,  its  distribution  can  not  be  left  to  natural  laws, 
but  must  be  looked  after  by  the  government.  Rate- 
making  is  purely  a  commercial  question,  like  the 
sux^x^ly  of  corn.  "  The  main  x^eculiarities  in  i*ailway 
rates  are  not  to  be  exx)lained  on  a  sux^x^^^ed  basis  of 


,Si>  /iM/Air.l}'  HATES 

justice  and  riiilit,  by  wliich  the  well-to-do  are 
cliaix^'d  hiyli,  and  the  nredy  ar»'  l<*t  oil*  easily.  One 
mii^ht  as  well  say  that  tlir  j)!  i(<s  of  iiniip  slcak  and 
of  tenderloin  were  fixed  as  a  matter  ol'  nierey  on  the 
poor  consumers  of  rumj)  and  of  tax  on  the  rich 
cimsumers  of  t+'uderloin,  and  ar^ue  thence  that, 
since  the  deli<'ate  business  of  adjusting;  this  appor- 
tionment couhl  not  1)»^  entrusted  with  safety  to 
]>rivate  persons,  the  State  should  take  into  its  hands 
the  JHisiness  of  cat  lie  laisiiii;."* 

Kates  are  relative  in  this,  that  they  are  i;-overned 
by  their  value,  exactly  as  rump  steak  and  tendej-- 
loiu  are.  Transportation  c<»mmands  a  i»ropoition- 
ately  bi^  rate  if  its  seivice  is  unavoidable,  a  less  late* 
if  not:  i.  e.,  it  may  dictate  terms  in  cases  of  monop- 
oly, but  not  in  other  cases.  "It  will  contribute 
more  and  sell  proporlicmately  high,  if  the  demand 
does  not  need  to  l)e  tempted  by  low  pjices,  and 
will  contribute  less  and  sell  i)roportionately  low,  if  a 
high  price  tends  to  choke  oil'  the  demand.  Trallic, 
which  will  continue  to  come,  even  at  compaiatively 
high  rates,  will  continue  to  be  taxed  high,  and 
will  contribute  largely  to  fixed,  charges. "f  Thus  a 
railway  Ijing  in  a  densely  populated  country,  or 
connecting  two  great  cities,  having  a  large  passen- 
ger traffic,  has  a  great  demand  for  such  kind  of 
service.  This  bears  a  proportion  of  the  joint  ex- 
i^euses  and  the  fixed  charges,  according  to  its  volnme 
and  the  profit  it  can  be  made  to  contribute.     This 


*F.  W,  Taussig,   "A  Coutributiou  to  the  Theory  of  Railway- 
Rates." 

t  Ibid. 


AND  GOVERNMENT  CONTROL.  89 

profit  helps  to  eke  out  less  productive  traffic;  to 
make  the  railway  as  a  whole  productive.  On  the 
other  hand,  ' '  traffic  for  which  the  demand  is  sensi- 
tive to  price,  and  which  can  begot  only  at  low  rates, 
will  contribute  little."* 

Tlie  business  of  railways  governs  itself.  It  adjusts 
itself  on  equitable  grounds  of  the  greatest  good  to 
the  greatest  number.  If  carriers  charge  too  much, 
their  business  diminishes  or  ceases,  their  revenues 
are  cut  off,  their  bonds  and  stock  dex)reciate,  that 
upon  which  they  depend  to  live  ceases.  Self-inter- 
est constantly  intervenes.  Herein  lies  the  protection 
of  the  cumiiiiinit y.  Governments  are  not  iiitluenced 
by  this  sul^tle  and  all  [)owerful  law;  they  maymake 
arbitrary  rates,  and  if  industries  aie  ruined  there])y 
they  claim  the  crown  of  martyrdom  as  public  bene- 
factors, in  this,  that  they  have  prevented  discrimi- 
nation! They  pose  as  public  benefactors,  when  they 
ought  to  be  luanded  as  asses. 

The  distinctions  that  exist  between  natural  and 
artificial  laws,  between  a  temperature  regulated  by 
the  atmosphere  and  one  fixed  by  individuals,  is  not 
more  marked  than  thediiference  between  a  })usiness 
carried  on  independently  by  private  parties  and  a 
business  in  which  the  gcjvernment  presumes  to 
meddle.  Governments  should  have  nothing  to  do 
with  railways,  except  of  a  supervisory  character,  in 
countries  having  the  commercial  enterprise  to  con- 
struct and  operate  such  properties.  The  intelligence 
and  facilities  of  government  are  but  one  step  above 

*F.  W.  Taussig,  "A  Contribution  to  the  Theory  of  Railway- 
Kates." 


90  n.irLWAV  RATES 

the  barbarian,  AVe  appeal  to  it  only  ^vllen  men  can 
not  ])e  found  to  carry  on  a  needed  enterprise. 

Those  who  use  railroads  should  pay  for  them,  the 
same  as  those  who  use  street  cars,  omnibuses,  drays, 
gurneys,  liacks,  wln^elbarrows,  and  donk^'ys.  Pro- 
fessor Colin,  who  is  peculiarly  parental  in  his  i(U*as, 
would  distribute  a  paii;  of  the  ])rice  X)aid  over  the 
public  generally.  He  would  make  the  industrious 
carry  those  who  are  lazy;  make  those  who  save  do 
so  for  the  benefit  of  those  who  spend.  He  can  not 
accustom  himself  to  the  thought  that  anybody  or 
anything  can  l)e  self-sustaining,  lie  looks  upon 
the  whole  human  race  as  a  race  of  imbeciles,  quasi 
paupers,  needing  constantly  the  strong  arm  of  the 
gov(Mnment. 

The  rate  carriers  charge  is  purely  a  question  of 
business,  of  expediency,  of  i)rivate  contract.  Any 
other  basis  would  (piickly  make  the  citizen  an  ob- 
ject of  i)ublic  aid;  the  carrier  an  ol)ject  of  charity. 
We  have  the  same  concern  in  building  up  a  pros- 
perous railroad  sj^stem  that  we  have  in  building 
uj)  prosperous  manufactories.  An  unremunerative 
railroad  is  a  burden  to  the  community,  as  much 
as  a  tax  on  real  estate  or  personal  property. 
If  existing  railways  are  not  in-ofitable,  no  more 
will  be  built.  Thus  competition  is  lessened. 
In  this  sense  the  cost  of  a  property  affects  rates. 
Railways  already  constructed  are  fixtures  bound 
to  the  soil.  On  these  traffic  Avill  be  carried,  if  it 
yields  a  return  over  and  above  cost  of  operating, 
"As  to  any  particular  item  of  traffic,  the  only 
question  is  whether  it  pays  more  than  the  cost  of 


AND  GOVEnNMENT  CONTROL.  91 

moving  it.  If  it  does,  the  traffic  is  advantageous  to 
the  railway,  even  though  the  excess  over  operating 
exj)enses  is  so  small  that,  if  the  same  x^roportion  held 
on  all  traffic,  very  little  vv^ould  be  earned  towards 
interest  and  dividends.  It  is  a  commonplace  in  the 
discussion  of  railway  rates  that  diU'erent  sorts  of 
traffic  contribute  in  very  different  degrees  toward 
paying  fixed  charges  and  dividends.  Some  classes 
of  traffic,  of  the  sort  that  can  be  got  only  if  the  rates 
are  low,  contribute  little;  others,  of  the  sort  that 
come  even  though  rates  be  high,  contril)ute  much."* 
In  considering  the  relation  of  rates  to  cost,  we  must 
remember  that  there  are  two  kinds  of  expenses: 
those  relating  to  traffic,  and  those  not  directly 
affected  by  traffic.  Their  influence  is  not  the  same. 
Economists  illustrate  the  principle  of  cost  as  it 
affects  the  i^rice  by  the  case  of  wool  and  mutton. 
The  producer  can  not  base  his  i)i'ice  on  the  cost  of 
producing  the  wool  and  mutton  separately;  but  he 
will  not  sell  his  wool  for  less  than  it  costs  to  shear, 
nor  his  mutton  for  less  than  it  costs  to  dress. 
Beyond  this,  the  price  he  obtains  for  his  X)roducts  is 
determined  by  the  law  of  supply  and  demand.  So 
in  the  case  of  railways  and  manufacturers  making 
a  diversity  of  articles.  Their  i^roducts  are  the 
result  of  joint  cost.  The  manufacturer  will  not  sell 
for  less  than  the  separate  cost  of  the  distinct  classes 
of  goods  lie]|  manufactures;  beyond  this,  the  prices 
he  obtains  are  fixed  by  the  law  of  supx)ly  and  de- 
mand.    Nor   will  the  carrier,  as  a  rule,   transport 


*F.  W.  Taussig,  "A  Contribution  to   the  Tlicory  of  Railway 
Rates." 


92  JiAILWA  y  RATES 

any  puiticiihir  .shipnieiit  lor  less  tliaii  it  costs  to 
curry  it;  the  price  lie  <;ets  over  Jind  above  this,  is 
deterniinetl  by  the  nature  of  the  demand  for  the 
transportation  furnished. 

Direct  cost  is  always  considered  in  lixing  the 
rate,  but  it  is  not  imperative  that  trallic  should 
pay  its  propoition  of  lixed  expenses,  i,  e.,  the  ex- 
penses that  would  i^o  on,  whether  or  no.  These  last 
are  considered  incidentally  in  lixini;;  the  rate;  if  the 
traffic  will  bear  its  proportion,  such  proportion, 
or  even  nioic,  is  addc^l;  if  it  will  not,  and  yet 
will  return  something  over  bare  exi)enses  incurred, 
it  is  still  taken.  The  ethics  of  trade  govern.  In 
the  case  of  passengers,  tln^  amount  chaiged  th(jse 
of  the  first  class  in  excess  of  others,  is  not  the  ad- 
ditional ex])ense  the  company  is  put  to,  l)ut  is  based 
on  ability  to  pay — on  what  the  traffic  will  bear,* 
But  in  the  case  of  freight,  the  principle  is  modi- 
fied or  ax>plied  in  a  different  way.  The  rate  is 
based  on  the  value  of  the  thing  carried.  It  is  higher 
on  silk  than  on  fuel.  The  fuel  that  is  to  be  consumed 
by  the  rich  j^ays  no  more  than  coal  to  be  consumed 
by  the  poor.  If  the  use  could  be  traced,  the  latter 
would  doubtless  influence  the  price.  But  it  can 
not.  In  one  sense,  the  princix^le  applied  to  j^as- 
sengers  and  freight  is  the  same,  considering  the 

* ' '  The  items  which  are  separable  —  such  as  the  more  expensive 
fitting  of  the  first-class  carriages  —  are  insignificant.  Wages  of  train- 
men and  engineer,  the  only  considerable  remnant  which  can,  under 
any  circumstances,  be  separated  from  the  '  general '  costs,  are  here 
incurred  for  all  three  classes  of  passengers  together.  It  would  be 
difficult  to  find  a  more  complete  illustration  of  the  application  of 
the  principle  of  joint  cost."  — F.  W.  Taussig. 


AND  GOVERNMENT  CONTIiOL.  93 

passengers  as  commodities  merely,  possessing  rela- 
tively different  values  analagous  to  the  different 
values  of  other  commodities. 

[Note. — Even  so  imperfect  an  explanation  of  the  interests  that 
affect  transportation,  and  that  are  in  turn  affected  by  it,  as  I  am 
able  to  give  here,  necessitates,  in  their  collateral  bearings,  frequent 
repetition  of  certain  cardinal  principles.  This  the  reader  will  under- 
stand, and,  I  trust,  excuse.  I  liave  endeavored  to  restrict  this  reitera- 
tion as  much  as  possible.  —  M.  M.  K.] 


CHAPTER  V. 

RAILWAY   RATES — DISCRIMINATION — POOLS. 

The  question  of  discriminatory  rates  is  not  a  new- 
one,  nor  coniined  to  any  2);irti('u]ar  country.  It  has 
been  the  subject  of  frequent  investigation  in  Europe, 
but  always  with  the  same  result,  namely,  that  they 
are  necessary  and  proper.  "The  unlimited  power 
of  varying  their  charges  to  the  public,  which  the 
companies  now  use,  ought  not  to  be  limited."^'  The 
abolishing  of  special  rates,  or  the  basing  of  rates  on 
distance,  the  English  government  has  found  would 
prevent  the  railways  competing  with  traffic  by  sea, 
canal  and  other  routes,  and,  because  of  this,  result 
to  the  detriment  of  the  community,  besides  robbing 
the  carrier  of  a  profit  legitimately  belonging  to  him. 
The  conclusions  of  the  French  authorities  are  the 
same.  "The  operation  of  railroads,  like  all  other 
industries,  is  subject  to  the  great  law  of  econom- 
ics; prices  shoukl  be  regulated  according  to  the 
value  of  the  transportation,  as  determined  by  the 
action  of  supi^ly  and  demand.  When  different  bases 
are  adopted,  such  as  the  length  of  haul  or  the 
amount  of  cost,  we  are  led  into  contradictions  and 

impossibilities A  railroad,  in  its  own 

interest,  and  in  that  of  the  country,  ought  not  to 

*  Royal  commission,  1872. 


96  ILirLWAV  HATES 

neglect  any  traflic  of  a  kind  that  will  increase  its 
receipts  more  than  its  expenses."* 

Competition  enforces  eqnitable  rates,  and  is  the 
only  gnarantee  we  have  of  their  maintenance.  It 
secures  the  lowest  possil)le  rates  (d)  on  the  neces- 
sities of  life,  (/>)  on  the  comforts  of  life,  (r)  on  luxu- 
ries and  similar  articles.  It  affects  most  favorably 
the  poorer  classes  whose  purchases  are  confined  to 
the  common  necessities  of  life.  To  disturb  compe- 
tition, is  to  increase  the  burdens  of  such  class,  to 
mak<'  its  struggle  harder,  to  i)ut  the  comforts  of  life 
farther  and  farther  from  its  reach,  to  entirely 
deprive  it  of  the  hope  of  possessing  a  luxury. 

The  word  "discrimination,"  in  modern  railway 
literature  and  discussion,  has  become  perverted. 
An  impi'oper  meaning  attaches  to  it.  Kightly  inter- 
preted, it  presupposes  the  exercise  of  a  discretion 
at  once  wise  and  salutar^^;  the  act  of  dissecting  and 
placing  in  proper  relation  the  component  parts  of 
a  subject.  For  instance,  it  indicates,  when  applied 
to  rates,  that  the  necessities  of  trade,  and  the 
equities  and  rights  of  all  concerned,  have  been  con- 
sidered. Unfortunately,  this,  the  true  meaning  of 
the  word,  no  longer  attaches  to  it.  It  has  been  so 
frequently  prefixed  with  the  adjective  "unjust," 
that,  insensibly,  the  people  have  come  to  attach 
that  qualification  to  it.  To  them  a  discriminative 
rate  is  synonomous  with  an  unfair  one.  The  ^vord 
has  thus  become  misleading.  Let  us  rejuvenate  it. 
When  a  rate  is  spoken  of  as  discriminatory,  let  us 
remember  that  it  is  not  necessarily  wrong,  but  that 

*'M.  de  la  Gournerie,  Inspector  General. 


AND  GOVERNMENT  CONTROL.  97 

in  its  exercise  experience,  intelligence,  and  due 
regard  for  the  necessities  of  commerce  and  tlie  rights 
of  all  concerned,  have  been  duly  considered.  If  a 
rate  is  unjust,  let  us  call  it  so.  Properly,  a  dis- 
criminatory rate  is  just,  because  intelligently  made. 
There  doubtless  have  been  cases  where  it  was  unjust. 
But  such  cases  do  not  constitute  a  rule;  are  not  to 
be  set  off  against  the  general  good,  any  more  than 
defects  in  particular  individuals  outweigh  the 
strength  of  all.  Tlie  marked  disposition  of  railway 
critics  to  attach  a  general  and  exaggerated  impor- 
tance to  particular  acts,  rt'nders  all  they  say  unworthy 
of  conlidence.  They  manif(»stly  lack  either  honesty 
or  intelligence.  If  a  railway  manager  is  dishonest, 
let  us  put  him  in  jail.  But  let  us  not  handicap  all 
railway  managers  because  of  his  sin.  Making  dis- 
criminatory rates  is  not  discretionary  with  rail- 
roads. It  is  a  duty  they  owe  the  community— an 
obligation.  This  they  have  recognized  and  cai-ried 
out.*  For  these  reasons,  the  attempt  to  make  it  ap- 
pear that  the  exercise  of  discriminatory  power  by 
railroads  in  making  rates  is  injurious  to  the  interests 
of  the  people,  corrupt,  unbusiness-like,  or  abhor- 
rent, can  not  be  too  severely  condemned.  Likewise, 
public  intelligence  should  condemn  those  who 
claim  that  carriers  should  enforce  equal  charges  for 


*  "  Every  step  leading  to  tlic  establishment  of  the  rates  that  shall  be 
charged  for  transportation  begins  and  cuds  in  the  exercise  of  discre 
tionary  authority.  Rates  are  never  measured  exclusively  by  the 
weiglit  of  the  articles  carried,  or  by  the  bulk,  or  by  the  cost  to  the 
carrier  of  transporting  them,  or  by  tlie  value  to  the  owner  in  having 
them  transported." — Fourth  Annual  Report  Interstate  Commerce 
Commission,  page  14. 
7 


98  liArLWAV  RATES 

equal  services;  tliut  charges  should  be  based  on  the 
same  standard  of  cost,  etc.,  etc.  How  far  those  who 
give  utterance  to  sucli  statements  are  ignorant,  how 
far  they  are  intentionally  misleading,  we  can  not 
tell.  A  tariff  based  on  cost  of  service  would  be 
prohil)itory.  Railioads  would  stop  when  the  maxi- 
mum rate  was  reached.  Necessity  and  interest 
alike  comjDel  the  carrier  to  reduce  maximum  rates, 
when  traffic  requires  it,  provided  there  is  left  a 
margin  of  i)rotit  over  the  cost  of  operating.  This  is 
discrimination.  It  lies  at  the  base  of  every  special 
rate.     It  is  one  of  the  concomitants  of  business. 

Further,  it  is  also  the  duty  of  carriers  to  make 
lower  rates  on  clieaj)  freights,  like  corn  and  fuel,  than 
on  cotton,  furniture,  and  trotting  horses.  This  also 
is  discrimination.  It  is  adaptation.  Its  exercise  is 
necessar}'  to  build  up  a  country. 

If  a  railroad  refuses  to  one  slii2")per  what  it  con- 
cedes to  another,  everything  being  alike,  article, 
place,  time,  quantity,  risk,  and  service,  that  is  not 
discrimination,  but  robbery.  Petty  instances  of  this 
kind  have  occurred  in  the  history  of  railway  man- 
agement. But  they  are  only  inst?ances.  They  are, 
however,  the  stock  in  trade  of  railway  critics.  They 
are  unworthy  of  notice.  They  form  no  aj)preciable 
element,  and  are  not  to  be  compared  for  a  moment 
to  the  benefits  that  grow  out  of  the  ability  of  car- 
riers to  adapt  their  properties  to  the  varying  needs 
of  those  they  serve. 

"No  law  .  ,  is  more  definitely  established  than 
that  .  .  accommodations  must  be  extended  to  all 
persons  on  the  impartial  principle  of  exactly  equal 


AJSm  GOVERN MENT  CONTROL.  99 

rates  for  equal  service. ' '  *  This  is  misleading.  Sucli 
a  law  would  forever  prevent  the  internal  develop- 
ment of  a  country;  would  confine  improvements  to 
the  sea-coast,  to  the  borders  of  navigable  rivers. 

Much  of  that  which  is  said  against  railroads  is 
dictated  by  ignorance.  But  much  more  is  actuated 
by  hatred,  by  a  desire  to  injure,  to  mislead;  it  mis- 
interprets every  act,  miscalculates  every  aim,  wrong- 
fully interprets  every  motive.  It  ignores  the  fact 
that  while  railways  are  built  to  make  money,  they 
must  be  operated  afterwards  to  meet  the  wants  of 
the  community  they  supply,  sharing  with  it  the  for- 
tunes of  the  day,  be  they  good  or  bad. 

A  railroad  is  not  a  money-making  machine,  in  the 
sense  that  a  banker  is,  who  may  leave  the  country  if 
the  rate  of  interest  is  not  such  as  to  satisfy  him.  It 
must  share  the  i^rofits  of  those  it  serves.  Its  lot  is 
cast  irrevocably  with  them.  Could  there  be  any 
greater  bond  of  good  behavior  ?  But  those  who  seek 
to  mislead  the  people,  and  the  dishonest  among  the 
latter,  are  not  satisfied  to  share  and  share  alike  with 
the  carrier.  They  want  the  lion's  portion.  Some- 
times they  have  succeeded  in  getting  it.  However, 
wherever  they  have,  the  misfortunes  of  the  carrier, 
it  is  gratifying  to  know,  have  reacted  fourfold  on  his 
persecutors.  Dishonesty,  here  as  elsewhere,  carries 
its  own  punishment. 

No  just  ground  of  complaint  against  the  practices 
of  railroads  exists  or  ever  has  existed.  Particular 
things  may  have  been  reprehensible.  But  we  do 
not  imj^rison  a  community  because  a  man  does  a 


*  J.  F.  Hudson,  "  The  Railways  and  the  Republic,"  page  149. 


100  MAIL  WAY  RATES 

dishonest  thing;  we  do  not  eschew  eggs  because  dogs 
suck  them  when  opportunity  offers.  No  great  and 
beneficent  thing  was  ever  more  unjustly  abused, 
more  grossly  misrepresented,  more  maligned,  than 
our  railroad  corporations.  The  vastness  of  the 
theme,  the  little  knowledge  that  the  majority  pos- 
sess of  it,  the  universal  interest  attached  to  the 
subject,  conspire  to  make  it  the  focus  of  public  mis- 
representation and  fraud.  "By  open  discrimina- 
tion, or  by  secret  rates,  drawbacks,  and  rebates,  a 
few  railway  managers  may  subject  to  their  will 
every  business  in  which  transportation  is  a  large 
element  of  cost,  as  absolutely  as  any  Oriental  des- 
pot ever  controlled  the  property  of  his  subjects.  No 
civilized  community  has  ever  known  a  body  of 
rulers  with  such  j)ower  to  distribute  at  pleasure, 
among  its  mercantile  classes,  prosperity  or  adver- 
sity, wealth  or  ruin.  That  this  is  no  abstract  or 
remote  danger  to  society,  is  plain  to  any  man  who 
will  look  at  the  condition  of  trade  and  of  mercan- 
tile morals  in  the  United  States  to-day.""*  How 
vivid !  But  how  absurd  !  hovv  untrue  !  Our  com- 
mercial morals  are  equal  to  the  highest  in  the 
world — to  those  of  any  peojDle  who  ever  existed. 
The  picture  is  overdrawn,  feverish,  fantastical, 
untrue.  Managers  have  no  such  discretion.  They 
could  not  exercise  it  if  they  liad.  The  idea  that  a 
great  internal  industry  upon  which  the  convenience, 
profit,  and  enrichment  of  the  world  rests,  is  depend- 
ent upon  such  discretion,  is  unworthy  the  intelli- 

*J.  F.  Hudson,  "The  Railways  and  the  Republic,"  pages  178 
and  179. 


JJSlJ  GOrERJSlfEST  COSTBOL.  101 

^nce  of  a  child.  That  a  book  containing  snch 
statements  shonld  receive  tlie  conijt!aner»T  of  r.  Tliird 
edition,  indicates  a  lack  of  public  iDtelUgence  or 
honesty  That  is  anything  but>r*ditaby  tb^  A'pi^Ica. 

No  business  can  be  carried  on  snccessf  ally  that 
deals  with  the  products  of  the  world  that  is  not 
accorded  abundant  discretion,  that  is  not  trusted, 
that  is  not  worthy  of  l>eing  trusted.  Every  fluctua- 
tion of  markers,  of  competitire  practices,  must  be 
considered  and  acted  upon  by  it,  not  at  some  indefi- 
nite time,  but  instantly.  Failure  to  do  so  is  to  lose 
the  golden  oppK:>rfuiiity.  to  cripple,  to  destroy. 

Commercial  prosjterity  and  growth  are  dependent 
upon  promptness  and  tinity  of  action.  It  is  sought 
to  deny  carriers  this  necessary  discretion,  lest  some 
rascal  should  receive  an  unmerited  favor,  should  be 
temporarily  benefited.  It  is  sought  to  cripple  our 
greatest  interest  because  of  exceptional  acts.  It  is 
to  be  made  the  football  of  idealists  and  charlatans 
because,  forsooth,  partictdar  men  are  dishonest, 
foolish,  or  ignorant.  The  malignancy  of  those  who 
seek  to  mislead  the  public  mind  in  regard  to  rail- 
roads is  on  a  par  with  that  of  those  who  delibeiately 
corrupt  the  sources  of  life. 

Every  emictment  that  curtails  the  discretion  of 
railway  owners  will  resnlt  disastrously  in  the  end, 
will  heighten  rates,  increase  prices,  lessen  produc- 
tion, reduce  the  area  of  business  activity — ^is  in  the 
interests  of  the  few. 

Many  of  the  regulations  it  is  sought  to  enforce  in 
the  practices  of  railroads,  while  ostensibly  in  the 
interests  of  the  people,  are  really  in  the  interests  of 


103  RAILWAY  RATES 

the  few;  of  a  j)articular  individual,  district,  class, 
or  jiiterest.  *  'Every  such  advantage  is  esteemed  fair. 
In  'trade',  tnifer'epresentation  is  a  common  weapon. 
'Kn  ai%u:rrient'  is  too  absurd,  no  utterance  too  puerile, 
if  it  accompl'ishes  its  purpose.  Men  go  to  every 
extreme  to  make  money  or  to  gain  the  end  they 
seek. 

In  one  breath  the  critics  of  railroads  deplore  com- 
petition between  railroads  as  injurious  to  the  inter- 
ests of  such  carriers.  In  the  next  they  refuse  them 
the  right  to  pool.  They  advocate  competition,  but 
deplore  its  effect  as  distributing  the  burdens  of  life 
unequally.  They  clamor  for  governmental  inter- 
vention, but  see  only  ruin  to  the  country  if  it  is 
necessary  for  capital  to  secure  the  apptroval  of  some 
official  body  before  embarking  in  railway  construc- 
tion; they  would  not  "place  the  freedom  of  trade 
under  the  control  of  bureaucracy  and  set  the 
claims  of  si^urious  railway  issues  above  the  freedom 
of  honest  caxDital."* 

So  far  as  a  uniform  rate  can  be  applied  to  traffic 
without  transgressing  any  law  of  trade,  it  is 
enforced    by    carriers.     They    should  be  accorded 

*  J.  F.  Hudson,  "  The  Railways  and  the  Republic,"  page  291.  I 
trust  Mr.  Hudson  will  excuse  me  for  quoting  him  so  often.  The 
reader  will  understand,  however,  that  I  recognize  in  him  an  honest 
exponent  of  that  enormous  army  of  writers  and  talkers,  who,  with  an 
exhaustless  rhetoric  and  abundance  of  time,  use  up  both  in  citing 
special  cases  of  wrong  on  the  part  of  railways,  and  from  these  special 
cases  seek  to  deduct  general  conclusions.  Mr.  Hudson  is  brilliant, 
vehement,  excitable,  tempestuous,  flooding  his  subject  with  a  torrent 
of  words  and  ideas;  the  ablest  of  his  class;  a  writer  worthy  of  a 
better  cause. 


AND  GOVERNMENT  CONTROL.  103 

every  facility  in  this.  The  right  to  pool  their  inter- 
ests at  comxDetitive  points  is  one  means.  The 
purpose  of  a  pool  is  to  eliminate  the  merely  fic- 
titious in  competition.  The  principle  remains 
undisturbed.  Unnecessary  waste  and  undue  ex- 
penditure are  prevented,  both  at  the  Junctions  of 
carriers  and  at  x)oints  where  railroads  compete  with 
water  routes  and  other  carriers.  The  benefits  grow- 
ing out  of  it  are  quite  as  important  and  valuable  to 
the  community  as  to  the  carrier.  They  can  not  be 
consummated  in  any  less  practical  way,  unless, 
indeed,  we  can  find  some  means  of  preventing  rate 
wars,  some  means  of  allaying  the  natural  rivalry 
of  carriers. 

In  practice,  carriers  must  be  allowed  discretion  to 
make  such  rates  as  are  necessary  to  secure  business. 
But  it  is  sought  to  use  the  exercise  of  this  discretion 
as  a  club  to  com]3el  them  to  make  discriminatory 
rates  the  normal  basis  of  their  tariffs;  to  make  a 
benefit  accorded  mankind  an  occasion  for  robbing 
the  benefactor;  to  make  an  abnormal  rate  normal.* 


*  "  There  are  few  important  lines  in  the  country  that  have  not,  at 
some  time  in  their  history,  been  carrying  freight  at  prices  that,  if 
long  continued,  would  cause  bankruptcy.  But  to  a  large  proportion 
of  the  public  the  fact  that  the  rales  were  accepted  was  proof  that 
they  were  reasonable;  and  when  advanced  rates  are  complained  of, 
the  complainants,  to  demonstrate  their  unreasonableness,  go  back  to 
the  war  prices,  and  cite  them  as  conclusive  proof  of  what  the  com- 
panies then  charging  them  can  afford  to  accept.  Many  popular 
complaints  have  their  origin  in  the  ideas  regarding  rates  which  these 
wars  have  engendered  or  fed,  and  the  evils  of  the  controversies  do 
not  end  when  the  controversies  are  over,  but  may  continue  to  disturb 
the  relations  of  railroad  companies  with  their  patrons  for  many 
years  afterward." — First  Annual  Report,  Interstate  Commerce  Com- 
mission, page  37. 


104  BAIL  WAY  RATES 

No  country  can  prosper  that  denies  to  its  carriers 
the  right  to  make  a  lower  rate  when  the  maximum 
can  not  be  attained.  No  country  can  be  built  up, 
or  its  greatness  maintained,  in  any  less  practical 
way.  But  a  low  rate  will  never  be  granted,  if  after- 
ward it  is  sought  to  make  it  the  basis  of  other  and 
more  productive  business.  Fairness  and  frankness, 
here  as  elsewhere,  are  the  price  of  commercial 
activity,  of  investment,  and  business  association. 

In  conceding  to  rival  carriers  the  right  to  pool,  it 
must  not  be  forgotten  that  the  laws  that  govern 
rates,  namely,  competitive  markets  and  the  self- 
interest  of  carriers,  operate  just  as  effectually  where 
there  is  a  pool  as  in  other  cases.  Rates  must  always 
be  such  as  to  secure  the  business,  such  as  to  afford 
every  one  a  margin  of  profit.  The  mechanical  effect 
of  a  pool  is  to  mollify  the  natural  Jealousy  and  dis- 
trust that  exist  between  carriers;  to  prevent  their 
making  ruinous  concessions  under  the  ax)prehension 
that  their  rivals  are  thus  acting;  to  prevent  injurious 
rate  wars  that  react  unfavorably  oh  both  communi- 
ties and  carriers. 

Pooling  does  not  have  the  effect  to  make  carriers 
neutral.  Their  desire  to  maintain  their  strength 
and  add  to  it,  will  always  lead  them  to  exert  them- 
selves to  the  utmost  to  pojoularize  their  routes  and 
attract  business  to  them.  Its  effect  is  to  steady 
rates.  It  does  not  i)revent  legitimate  competition. 
A  jDool  is,  at  best,  only  temporary.  For  that  reason 
carriers  dare  not  let  their  properties  run  down,  dare 
not  let  their  traffic  be  diverted  for  lack  of  facili- 
ties or  effective  service.      The  public,  therefore,  is 


AND  GOVERNMENT  CONTROL.  105 

assured  of  as  good,  if  not  better,  service  where  a 
pool  exists  as  in  otlier  cases.  It  does  not  prevent 
the  strife  of  carriers,  but  adds  to  their  ability  to 
meet  the  just  expectations  and  desires  of  their  cus- 
tomers. It  j)revents  extravagance,  waste,  unneces- 
sary exjDenses. 

In  order  to  secure  the  highest  advantages  from 
pooling,  it  should  have  back  of  it  the  authority  of 
the  law,  should  be  binding  on  the  carriers  interested. 
Its  infringement  should  be  a  misdemeanor.  This 
j)rotection  is  due  to  the  country;  it  is  due  to  the 
owners  of  railroads  and  investors,  to  whom  we  are 
indebted  for  the  unexamj^led  development  of  the 
country.  Its  effect  is  to  measurably  remove  from 
designing  persons  the  ability  to  increase  or  diminish 
the  price  of  stocks  by  manipulation  of  rates  at  com- 
petitive i)oiuts.  Not  that  practices  of  this  kind 
have  been  usual  or  general.  They  have  not.  They 
cut  no  figure.     They  are  like  all  other  exceptions. 

There  can  be  no  x^ossible  objection  to  a  pool,  save 
in  the  possible  instance  where  it  covers  a  monopoly 
of  a  product,  including  all  its  substitutes.  Such  an 
instance  is  improbable. 

Pooling  is  in  accordance  with  good  business  usage 
and  the  conservative  instincts  of  trade.  It  prevents 
foolish  extravagance,  and  materially  lessens  cost  of 
operation.  To  prevent  it,  is  unfair  to  the  carrier 
and  generally  harmful  to  the  community.  Opx)res- 
sion  could  hardly  be  carried  further;  it  can  only 
be  excused  on  the  ground  of  public  misapprehen- 
sion, of  public  delusion.  Its  prevention  is  contrary 
to  the  customs  of  every  enlightened  country  save 


106  RAILWAY  RATES 

ours.  While  governmental  authorization  of  pools 
is  desirable,  it  is  not  absolutely  necessary.  Indeed, 
it  would  not  be  at  all  desirable,  if  it  were  the  enter- 
ing wedge  to  governmental  interference  generally. 
The  ingenuity  of  carriers  will  provide  a  way  to  make 
it  effective,  if  they  are  left  unimpeded.  Its  j)urpose 
is  not  to  carry  out  private  measures.  Such  a  pur- 
pose would  be  reprehensible.  It  is  a  matter  of  pub- 
lic concern,  because  its  object  is  the  protection  and 
perpetuation  of  the  properties  it  affects.  Instances 
may  have  occurred  where  the  purposes  of  j)ooling 
have  been  jDerverted;  but  they  cut  no  figure.  No 
one  thinks  of  putting  the  world  under  police  sur- 
veillance because  particular  men  have  gone  astray. 

We  do  not  refuse  to  recognize  an  economic  law 
because  it  is  sometimes  abused.  The  instances  that 
are  cited  where  private  greed  has  taken  advantage 
of  jjooling  to  accomplish  personal  ends,  are  some- 
thing apart  and  exceptional;  do  not  in  any  way 
vitiate  the  princij)le  of  good  that  lies  back  of  it;  do 
not  lessen,  generally,  the  desirability  of  permitting 
men  to  enter  into  business  contracts  and  agreements 
with  each  other,  and  of  xorotecting  them  therein. 

The  principles  of  pooling  and  the  benefits  it  con- 
fers have  been  lost  in  a  maze  of  untruthful  and 
sophistical  statements.  One  of  its  objects  is  the  pre- 
vention of  unnecessary  discrimination  between  per- 
sons and  i^laces.  A  directly  contrary  pur^Dose  is 
ascribed  to  it.*     So  long  as  rates  are  determined  by 

*"  Admitting  that  the  pool  will  abolish  the  discriminations  com- 
plained of,  it  will  also  abolish  the  freedom  of  trade  movements  and 
the  operation  of  natural  laws  of  commerce,  in  whose  defense  alone  the 


AND  GOVERNMENT  CONTROL.  107 

influences  over  which  particular  carriers  have  no 
control,  it  will  be  safe  to  entrust  the  latter  with  dis- 
cretionary power.  Moreover,  their  interests  and  the 
interests  of  their  patrons  are  inextricably  inter- 
woven; the  injury  of  one  is  the  injury  of  both. 
Herein  is  a  country's  safeguard — a  safeguard  sim- 
ple, efl'ective,  and  intelligent  beyond  extraneous  in- 
fluence or  authority;  a  safeguard  always  present, 
alert,  and  apprehensive;  a  safeguard  upon  which  the 
commerce  of  the  world  has  depended  from  the  start, 
and  upon  which  it  must  depend  to  the  end. 

One  object  sought  in  pooling  is  the  reduction  of 
expenses.  This  is  in  the  interest  of  the  shipper, 
because  it  places  the  carrier  so  much  nearer  the 
goal  of  a  maximum  return  on  his  capital.  It  also 
prevents  rate  wars.  These  latter  are  an  incident  of 
railway  practice.  While  in  many  respects  deplor- 
able, they  have  not  been  wholly  bad.  They  have 
had  the  efi:ect  to  stimulate  carriers,  to  sweep  away 
obstructions,  to  eliminate  the  wrecking  enterj^rises, 
that  have  from  time  to  time  sprung  into  being  for 
blackmailing  purposes,  or  as  a  means  of  making 
money  out  of  the  sale  of  securities  or  construction 
contracts.  Generally,  however,  they  are  harmful. 
Railway  strife  here,  as  elsewhere,  requires  to  be 
tempered  and  its  action  minimized  by  conservative 
influences.     Hence  the  device  of  pooling. 


practice  of  discrimination  is  resisted.  The  railway  pool,  as  a  remedy 
for  discrimination,  is  a  leap,  from  the  frying-pan  of  inequitable  and 
partial  exactions  by  the  railway  power,  to  the  triple-heated  furnace  of 
absolute  and  arbitrary  rule." — J.  F.  Hudson,  "  The  Railways  and 
the  Republic,"  page  232. 

Mr.  Hudson  is  always  picturesque,  albeit  somewhat  trying.     He 
writes  by  lur  luu  much  for  the  galleries. 


108  RAILWAY  BATES 

The  owners  and  managers  of  railroads  are  not 
different  from  their  neighbors.  They  are  no  better, 
no  worse.  They  must  be  judged  from  the  same 
standjDoint;  not  the  standpoint  of  the  lourist,  but 
the  standi^oint  that  has  animated  business  men,  from 
the  time  of  the  Phoenicians  down  to  the  present 
moment.  Their  methods  and  aims  are  honorable, 
laudable,  beneficial  to  mankind.  If  not  meeting 
our  aj)proval  in  every  respect,  we  must  not  con- 
demn them  wholesale,  but  leniently,  leaving  the 
correction  of  their  mistakes  (never  heinous  or 
unmixed  with  good)  to  the  mollifying  influence  of 
time.  Why  should  they  be  singled  out  for  repro- 
bation and  spoliation  more  than  the  merchant, 
farmer,  or  blacksmith  'i 

The  device  of  pooling  is  as  old  as  the  practice  of 
barter  and  sale.  Certain  destructive  effects  that 
attend  competition  have,  in  every  age,  been  modi- 
fied by  x^rivate  agreement  among  local  traders. 
Such  agreements  do  not  prevent  competition  or 
sensibly  allay  competitive  effort.  They  are  bene- 
ficial, because  conservative  in  their  tendencies. 
They  can  not  be  made  sufficiently  far-reaching  to 
constitute  monopolies. 

A  monopoly  can  only  be  made  effective  by  being 
made  universal.  And  if  it  were  i^ossible,  those 
interested  in  it  would  still  find  their  advantage  in 
the  direction  of  low  prices  and  increased  consump- 
tion, rather  than  in  high  prices  and  moderate 
consumption.  The  distinct  divisions  of  the  human 
race  and  the  multiplicity  of  its  interests  prevent 
combination.     Trade    can    not    be   bound.     Man's 


AND  GOVERNMENT  CONTROL.  109 

methods,  needs,  instincts,  and  selfishness  prevent 
it.  He  is  too  solicitous  of  personal  gain,  too  wary, 
too  unstable,  to  be  controlled,  except  in  a  limited 
way. 

The  purpose  of  a  pool  is  not  to  make  rates  high, 
but  to  maintain  reasonable  rates;  to  preserve  the 
revenues  of  the  carrier  that  he  needs  in  imiDroving 
and  operating  his  projDerty. 

The  apprehension  that  pooling  prevents  compe- 
tition would  be  true,  if  competition  were  merely  local. 
But  it  is  not.  It  is  animated  by  the  action  of  rail- 
roads in  every  part  of  the  world,  by  water  routes, 
by  other  means  of  carriage;  by  the  energy,  versa- 
tility and  covetousness  of  men;  by  the  abundance 
of  caj)ital;  by  the  law  of  supply  and  demand. 

Pools  place  the  competition  of  railroads  on  a 
rational  basis— on  the  basis  of  common  interest,  as 
between  the  carrier  and  his  patrons.  They  eliminate 
the  element  of  chance,  of  hasty  and  inconsiderate 
action,  of  indeterminate  causes.  Beneficial  compe- 
tition will  still  remain,  because  founded  on  condi- 
tions that  are  constant  and  unchanging,  on  natural 
laws  that  are  not  determined  by  particular  persons 
or  groups  of  men,  but  by  the  concurrent  action  of 
the  whole  world. 

In  every  country  save  the  United  States,  pooling- 
is  recognized  as  an  essential  element,  a  necessary 
concomitant  of  railways.  It,  or  some  effective  sub- 
stitute, will  again  be  so  recognized  here,  or,  failing 
in  this,  we  shall  sooner  or  later  see  a  jiractical  con- 
solidation of  all  our  railroads.  Pooling  does  not 
necessarily  invite  governmental  supervision.     But 


110  RAILWAY  RATES 

carried  on  under  the  eye  of  the  government,  the 
apprehensions  of  the  suspicions  and  timid  would  be 
allayed.  In  the  United  States,  it  would  be  carried 
on  under  the  supervision  of  the  Interstate  Com- 
merce Commission.  This  commission  has  already 
done  much,  and  i^romises  to  do  much  more,  to 
correct  popular  prejudice,  and  allay  public  pas- 
sion against  railways.  As  it  studies  the  laws 
governing  railway  transportation,  it  will  discover 
that  they  are  superior  to  men ;  that  they  are 
natural  and  equitable;  that,  while  the  practices  of 
carriers  are  sometimes  reprehensible,  they  are,  in 
the  main,  of  unexampled  benefit.  Thus,  the  scope 
and  color  of  the  duties  of  the  commission  will  take 
on  a  complaisant  hue;  it  will  occupy  the  position  of 
an  alert,  unprejudiced  tribunal;  it  will  discover  that 
the  law  under  which  it  operates  is  not  so  much 
harmful  as  misleading;  that  active,  aggressive,  con- 
stant discrimination  is  a  necessary  element  of  trans- 
portation; that  the  traffic  of  the  country  can  not 
be  handled  effectively  under  any  other  less  compre- 
hensive system;  that  favoritism  is  not  now,  and 
never  has  been,  the  practice  of  railroads,  except  in 
isolated  and  unimportant  instances;  that  shippers 
can  only  claim  equality  when  time,  place,  and  cir- 
cumstances are  alike;  that  rates  must  be  such  as 
circumstances  require  and  the  wants  of  commerce 
demand;  that  j)ooling  is  not  iniquitous,  but  whole- 
some, an  essential  element  of  railway  traffic;  that 
it  is  not  monopolistic;  that  reductions  in  rates, 
brought  about  by  governmental  or  other  extraneous 
influence,  are  to  be  dejplored  because  harmful  alike 


AND  GOVERNMENT  CONTROL.  HI 

to  carrier  and  customer;  that  to  be  permanent  and 
valuable  they  must  be  self-imposed.  In  reference 
to  railway  owners  and  managers,  it  will  find  that 
they  are  not  here  as  moral  examples  or  object  les- 
sons for  purists,  but  as  engines  of  material  good  to 
mankind;  that  they  i)ossess  the  virtues  and  weak- 
nesses common  to  business  men;  that  they  are  gen- 
erally w^orthy  of  trust;  that  they  alone  understand 
the  transportation  question  and  its  needs;  that  they 
alone  are  able  to  fully  meet  these  needs;  and  finally, 
that  they  must  be  accorded  a  liberal  discretion  to 
enable  them  to  withstand  the  endeavors  of  the  piib- 
lic  and  rival  enterj)rises.  These  self-evident  truths 
are  everywhere  recognized  by  those  who  have  given 
the  subject  of  railwa3^s  unprejudiced  thought.  They 
are  recognized  by  foreign  governments.  Our  Inter- 
state Commerce  Commission  will  secure  their  gene- 
ral recognition  in  the  United  States. 

Enactments  i^rohibiting  pooling  are  not  only 
unwise,  but  they  are  grossly  unjust;  the  railway 
companies  are  injured,  while  the  community  gene- 
rally is  not  benefited.  Any  law  or  restriction  that 
deprives  a  carrier  of  an  opportunity  to  add  to  his 
profits,  "under  circumstances  where  the  enforce- 
ment of  the  prohibition  will  result  in  no  benefit  to 
the  community,  but  will  deprive  the  company  of 
any  adequate  return  on  the  just  value  of  its  prop- 
erty,"* is  to  be  condemned  from  every  point  of 
view.  Such  restrictions  are,  in  the  main,  the  result 
of  ignorance.  They  are,  however,  in  some  instances 
planned  maliciously  to  meet  interests  antagonistic 


*"W.  D.  Dabney,  "  The  Public  Eegulation  of  Railways,"  page  59. 


112  RAILWAY  RATES 

to  the  general  good.  In  any  event  they  are  deplor- 
able, but  doubly  so  if  they  deprive  the  owner  of 
revenue,  necessary  to  the  maintenance  of  his  prop- 
erty or  a  reasonable  return  on  his  investment.  The 
equity  of  this  is  recognized  by  the  courts,  but  in 
practice  it  is  much  impeded.  ' '  Where  the  x)roposed 
rates  will  give  compensation,  however  small,  to  the 
owners  of  railroad  property,  the  courts  have  no 
power  to  interfere."*  But  if  the  rates  fixed  by 
carriers  will  not  ' '  pay  some  comj)ensation  to  the 
owners,  then  it  is  the  duty  of  the  courts  to  interfere 
to  protect  the  companies  from  such  rates."  f  In 
no  case,  however,  have  they  ever  done  so.  For  this 
abstinence  we  should  be  thankful. 

The  circumstances  of  business  that  render  it  im- 
possible for  traflBc  to  pay  the  same  rate  per  mile, 
have  been  referred  to.  The  carrier  is  an  impassive 
agent.  He  does  not  create  conditions,  but  obeys 
them.  What  he  does  "is  not  done  wantonly  for 
the  purpose  of  putting  the  one  place  up,  or  the  other 
down;  but  only  to  maintain  its  business  against 
rival  and  competing  lines  of  transportation."  X  His 
action  is  precipitated  by  the  nature  of  competi- 
tion,   by    the    advantages    of    one    location    over 


*  Judge  Brewer  in  the  Federal  Court. 

"State  statutes,  expressly  forbidding  a  greater  charge  for  the 
shorter  than  the  longer  transportation,  have  sometimes  been  violated 
by  railroad  companies,  with  the  tacit  consent  of  the  authorities, 
where  their  enforcement  would  manifestly  have  been  unjust  to  the 
companies  and  productive  of  no  public  good." — W.  D.  Dabney, 
"The  Public  Regulation  of  Railways,"  page  183. 

f  Judge  Brewer  in  the  Federal  Court. 

]:  W.  D.  Dabney,  "The  Public  Regulation  of  Railways,"  page  65. 


AND  GOVERNMENT  CONTROL.  113 

another,  of  one  market  over  another.  What  he 
does  is  in  the  interest  of  the  community,  because  its 
comforts  and  necessities  are  augmented  thereby. 
"  Tlie  general  public  welfare  demands  the  mainte- 
nance of  this  salutary  principle  of  railroad  transpor- 
tation*' (i.  e.,  charging  less  relatively  for  a  longer 
than  a  shorter  haul).  "  Upon  it  is  based  the  im- 
mense internal  commerce  of  the  country,  whereby 
exchanges  of  products  are  effected  between  the  most 
distant  portions  of  the  Union,  and  all  sections  bound 
together  by  the  strongest  ties  of  mutual  interest. 
By  it  the  fields  of  production  are  enormously  ex- 
panded; the  values  of  lands  remote  from  markets 
are  enhanced;  the  price  of  every  necessity  of  life  is 
reduced;  the  surplus  products  of  the  interior, 
amounting  to  hundreds  of  millions  in  value,  are 
thus  brought  to  the  seaboard.  In  the  United  States, 
the  ax^plication  of  this  princij)le  has  produced 
great  hardships,  especially  to  the  agricultural  inter- 
ests of  the  Atlantic  States." -'  But  these  hardships 
were  unavoidable.  It  would  not  have  heljDed  the 
eastern  farmer,  located  on  a  line  of  railway  com- 
pelled to  abandon  its  competitive  trafiic,  becanse  of 
an  enactment  preventing  its  charging  less  for  a 
longer  than  a  shorter  haul.  Such  prohibition  would 
diminish  the  revenues  of  the  road,  bnt  "would  not 
enhance  the  price  of  his  products  in  the  markets  of 
the  world,  for  they  are  governed  by  the  cost  of 
transportation  over  the  cheapest  routes  by  which 
the   demand  can   be  supj)lied.     It  is  cheap  trans- 


*W.  D.  Dabney,  "The  Public  Regulation  of  Railways,"  pages 
104,  105. 
8 


114  HAIL  WAY  RATES 

portation  over  other  routes  which  puts  him  at  a 
disadvantage,  much  more  than  the  discrimination  in 
favor  of  the  longer  haul  by  the  line  over  which  he 
ships."*  An  unanswerable  argument  against  pro- 
hibitory enactments  of  this  kind,  is  the  double 
injury  they  inflict — injury  both  to  the  community 
and  the  carrier;  increasing  the  cost  of  living  to  the 
former,  and  depriving  the  latter  of  a  just  return  on 
his  property.  "Discrimination  which  produces  no 
injury  can  not  be  considered  unjust;  if  it  can  be 
shown  that  discrimination  may  in  certain  cases  be 
actually  beneficial  to  the  community  api^arently 
discriminated  against,  it  should,  instead  of  being 
denounced,  be  encouraged." f  The  influence  that 
governs  carriers  is  not  local;  the  iDower  that  joropels 
them  is  as  wide  as  the  industrial  world.  As  I  have 
had  frequent  occasion  to  state:  "  It  is  not  the  com- 
merce of  one  nation  or  continent  alone,  that  deter- 
mines the  conditions  of  transportation  within  its 
limits,  but  that  of  the  civilized  world."  1;. 

The  advantages  of  competitive  traffic,  as  between 
the  carrier  and  local  shipper,  are  reciprocal.  The 
latter  is  directly  concerned  in  adding  to  the  income 
of  the  former  in  every  projDer  way.  This  interest  is 
based  on  enlightened  selfishness — on  that  of  part- 
nership. The  profit  the  carrier  derives  from 
competitive  traffic  he  shares  with  his  clientage. 
' '  By  taking  competitive  traffic,  even  at  excessively 

*W.  D.  Dabney,  "The  Public  Regulation  of  Railways,"  page 
118. 

\  Ibid,  page  111. 
XI  bid,  page  113. 


AND  GOVERNMENT  CONTROL.  115 

low  rates,  the  railroads,  to  the  extent  that  any  net 
revenue  is  derived  from  it,  are  enabled  to  reduce  the 
rates  on  local  traffic;"  *  i.  e.,  they  will  be  able  to 
reduce  rates  when  the  return  on  a  property  equals 
the  maximum  interest  allowed  on  such  investments. 

Under  the  beneficent  law  of  exchanges,  communi- 
ties far  removed  from  each  other  receive  the 
reciprocal  benefits  that  flow  from  active  comx3etition, 
when,  under  other  circumstances,  they  would  be 
subject  to  local  monopoly.  Thus,  the  farmers  in 
the  north  and  south  of  England  are  enabled  to  buy 
their  plows  and  wagons  at  a  much  lower  j^rice 
than  they  woukl  if  manufacturers  located  at  these 
extremes  were  not  able  to  ofl'er  their  products  in 
competition  with  each  other;  if  they  were  not 
allowed,  by  low  rates,  to  ship  their  goods  from  one 
end  of  the  country  to  the  other.  The  value  of  the 
principle  is  not  restricted  to  particular  articles  of 
commerce,  A  community  derives  benefit  and  x^rofit 
from  its  application  in  proportion  to  the  need  that 
exists  for  an  article.  Its  exercise  is  dependent  upon 
the  discriminatory  rates  of  carriers. 

It  has  been  suggested  that  long  and  short  haul 
rates  should  be  exercised  only  under  the  supervision 
of  the  government;  that  it  should  be  the  duty  of 
the  latter,  among  other  things,  to  see  that  no  traffic 
is  handled  by  railroads  improperly,  or  that  does  not 
pay  a  profit  to  the  carrier.  The  precaution  is  an 
unnecessary  one.  Self-interest  will  prevent  carriers 
making  an  unremunerative  rate.     They  may  do  so 


*  W.  D.  Dabney,  "The  Public  Regulation  of  Railways,"  pages 
114,  125, 


116  BAILWAY  BATES. 

in  isolated  and  exceptional  instances.  But  such  in- 
stances cut  no  figure  in  the  operations  of  railroads 
as  a  whole.  However,  the  supervision  can  do  no 
harm  if  wisely  exercised.  It  may  tend  to  placate 
public  opinion,  which,  in  the  United  States  at  least, 
regards  every  railway  corporation  "as  the  natural 
enemy  and  opi3ressor  of  the  masses  of  the  people, 
to  be  despoiled  and  warred  upon  whenever  occasion 
offers."  ^  This  antagonism  lies  at  the  bottom  of 
every  unjust  verdict  against  railroads;  lies  back  of 
the  oppressive  legislation  that  disfigures  our  law- 
books, and  that  makes  our  railroad  companies  little 
better  than  common  outlaws. 


* W.  D.  Dabney,  "The  Public  Regulation  of  Railways,"  page 
380. 


CHAPTER  VI. 

SPECIAL  RATES  AND   THEIR  RELATION  TO  COMMERCE. 

I  have  referred  to  the  question  of  sjiecial  rates  in 
the  preceding  chapter,  but  not  extensively.  The 
subject  merits  more  extended  notice.  A  rightful 
solution  of  it  is  of  the  greatest  importance. 

Every  rate  made  by  a  railway  is  a  special  rate, 
because  conditions  are  in  no  two  cases  exactly  alike. 
Special  rates,  however,  are  generally  understood  tq 
mean  those  that  are  given  to  imrticular  individuals 
to  meet  especial  emergencies — a  rate  lower  than  the 
established  tariff.  It  is  in  this  sense  that  I  use  the 
term  in  the  following  chapter.  The  interstate  com- 
merce act,  already  referred  to,  restricts  the  use  of 
special  rates.  The  carrier  must,  in  every  case  where 
he  gives  a  special  rate,  print  and  post  a  tariff'  there- 
for. Thus  the  railway  companies  are  annually 
subjected  to  the  exjoense  and  annoyance  of  printing 
millions  of  tariffs,  each  tariff  particularly  governing 
a  particular  rate  for  a  particular  individual.  This 
supposed  iDublicity  is  thought  to  be  necessary  to 
protect  the  community  from  collusion  between  car- 
riers and  shipj)ers;  a  most  absurd  precaution,  and 
one  that  involves  enormous  expense  and  annoyance, 
alike  injurious  to  the  carrier  and  to  the  community. 
No  doubt  instances  have  occurred  where  the  use 
of  special  rates  has  been  attended  with  favoritism, 

(117) 


118  RAILWAY  BATES 

where  there  was  an  understanding  between  the 
agent  of  the  carrier  and  the  shipper,  where  the 
agent  derived  some  jjersonal  advantage  therefrom. 
But  such  cases  have  neither  been  frequent  nor  gen- 
eral, and  are  unworthy  of  notice  in  comparison  with 
the  good  that  has  grown  out  of  the  unrestricted  use 
of  sj)ecial  rates.  To  condemn  them  because  of  such 
practices,  is  very  much  like  condemning  the  bank- 
ing system  of  a  country  because  a  cashier,  or  half  a 
dozen  cashiers,  are  rascals. 

The  economic  principle  that  underlies  the  making 
of  a  rate  finds  more  apt  ex^^ression  in  the  sx)ecial 
rate  than  in  any  other.  It  more  nearly  accords  with 
business  j)ractices  than  any  other;  more  nearly  rep- 
resents the  measure  of  value  between  what  a  thing  is 
worth  at  the  i^oint  of  shipment  and  the  price  it  will 
bring  at  the  place  of  consumption.  In  the  practical 
conduct  of  traffic  such  rates  are  made,  in  particular 
cases,  when  business  can  not  afford  to  pay  regular 
rates.  They  are  made  after  the  most  searching  in- 
quiry as  to  what  the  traffic  will  bear.  Their  x^ur- 
pose  is  to  stimulate  production;  to  facilitate  ex- 
changes. "The  principle  which  governs  a  railway 
company  in  fixing  the  rate  is  that  of  creating  a 
traffic  by  charging  such  sum  for  conveyance  as  will 
induce  the  iDroduct  of  one  district  to  compete  with 
that  of  another  in  a  common  market."*  If  left  un- 
obstructed in  the  operations  of  their  j)roperty, 
special  rates  will  be  made  by  carriers  whenever 
necessary  to  encourage  trade  or  foster  new  enter- 
prises.    In  some  instances,  they  will  be  made  at  a 


■Royal  Commission  ou  Railways'  Report,  page  xlvii. 


AND  GOVERNMENT  CONTROL.  119 

loss,  in  the  liox)e  that  a  remunerative  traffic  will 
grow  out  of  them.  They  may  be  likened  unto  the 
principle  of  j)rotection,  so  necessary  in  the  youth  of 
a  nation,  and  so  unnecessary  when  its  industries  are 
once  established.  ' '  The  power  of  granting  special 
rates  permits  a  development  of  trade  that  would  not 
otherwise  exist,  and  it  is  abundantly  evident  that  a 
large  portion  of  the  trade  of  the  country  at  the  pres- 
ent time  has  been  created  by,  and  is  continued  on 
the  faith  of,  special  rates."* 

Special  rates  benefit  both  producer  and  consumer, 
render  possible  an  exchange  of  commodities  not 
otherwise  practicable.  They  facilitate  trade  and 
cheapen  cost  to  consumers.  The  isolated  instances 
of  wrong  that  grow  uj)  under  them  are  unimpor- 
tant, are  not  to  be  compared  to  the  general  good 
they  engender.  To  restrict  their  use  because  of 
these  wrongs,  is  to  deprive  the  world  of  a  good  be- 
cause individuals  are  sufferers;  is  to  make  the  con- 
venience or  profit  of  particular  persons  the  measure 
of  commercial  activity;  is  ver}^  much  like  abolish- 
ing passenger  trains  because  individuals  are  injured 
by  them.  Those  who  inveigh  against  the  use  of 
special  rates  do  not  recognize  the  effect  upon  the 
commerce  of  the  world  that  their  prohibition  would 
engender. 

Special  rates  are  the  buttress  and  foundation  of 
business,  without  which  it  could  not  be  carried  on. 
Under  them  communities  are  lifted  out  of  the  slavery 
of  local  environment,  are  generalized,  are  made  the 
beneficiaries  of  an  extended  market.     It  is  claimed 


*  Royal  Commissiou  oa  Railways'  Report,  page  xlvii. 


120  BAIL  WAY  RATES 

that  they  are  unnecessary  and  unjust.  They  are 
both  necessary  and  just;  both  equitable  and  fair. 
They  represent  a  need  and  its  gratification.  Wliile 
sj)ecial  in  their  issuance,  their  purx)ose  is  the  general 
good.     They  rei)resent  an  integral  part  of  business. 

Rates  that  can  not  be  adjusted  to  meet  the  exigen- 
cies of  the  hour  are  a])t  to  be  a  drag  on  the  commerce 
of  a  country,  are  mischievous,  are  likely  to  cripple 
the  interests  they  should  serve.  Special  rates  are 
discriminatory;  are  a  recognition  of  the  immutable 
law  of  trade,  of  its  11  uctuations  and  inequalities;  a 
relinquishment  of  a  part  to  avoid  losing  the  whole. 
They  represent  in  transportation  the  practice  of 
commercial  life  that  accords  something  to  every  one 
who  handles  a  product. 

The  purpose  sought  in  giving  a  special,  rate  is 
selfish.  But  its  value  to  the  community  is  none  the 
less  material  on  that  account.  The  industrial  inter- 
ests that  crowd  the  lines  of  our  railroads  owe  their 
inception  and  growth  to  the  sx)ecial  rates  that  have 
been  granted  them.  Without  the  use  of  such  rates, 
the  undeveloped  portions  of  the  country  would,  in 
the  main,  rem.iin  as  destitute  of  manufactories  as  the 
bridle  paths  of  Afghanistan.  It  is  possible — proba- 
ble— that  special  rates  are  sometimes  granted  un- 
wisely, are  used  improperly;  but  this  is  only  saying 
that  man  is  fallible.  They  are  none  the  less  neces- 
sary, none  the  less  valuable  because  of  it.  They  are 
the  delicate  fluid  that  anohits  and  lubricates  the 
joints  of  the  transportation  body.  Without  them 
the  wheels  of  commerce  would  cease  to  turn;  we 
should  revert  to  the  period  when  the  stage  coach  and 


AND  GOVERNMENT  CONTROL.  121 

the  overland  teamster  fixed  the  limits  of  commerce 
and  the  status  of  cities.  They  represent  an  effort  to 
adjust  business  to  the  requirements  of  trade;  are  the 
highest  evidence  we  have  of  commercial  wisdom  and 
acumen;  are  a  concurrence  in  the  customs  and  needs 
of  particular  industries;  an  intelligent  recognition  of 
God's  natural  law  of  trade — the  adjustment  of  prices 
according  to  the  requirements  of  sui^ply  and  demand. 
Almost  every  great  industry  that  has  grown  up  owes 
its  inception  to  a  special  rate.  Without  this  aid,  it 
could  not  have  started,  would  not  have  been  per- 
sisted in.  It  has  been  to  manufacturers  the  mother's 
milk  of  our  time.  Other  countries  recognize  and 
utilize  this  truth,  and  will  continue  to  do  so,  so  long 
as  commercial  needs,  rather  than  theories  and  ab- 
stractions, govern. 

The  right  governments  claim  to  fix  the  rates  of 
carriers,  is  probably  the  last  authoritative  expression 
we  shall  have,  in  our  time,  of  the  practices  so  com- 
mon with  mediaeval  and  barbaric  governments,  of 
fixing  the  price  of  the  necessaries  of  life — meat, 
potatoes,  bread,  etc. — a  practice  at  once  autocratic, 
restrictive,  and  narrow.  It  represented  paternalism; 
timid,  stifl'-necked,  distrustful,  and  baneful.  The 
practice  created  distrust.  If  the  price  fixed  was  too 
low  to  afford  a  profit,  scarcity  ensued;  want,  dis- 
tress, and  famine  followed.  It  repressed  production. 
Attempts  to  fix  the  rates  of  carriers  will  not  be  per- 
sisted in  when  its  baneful  effects  are  generally 
known.  Its  apparent  success,  within  the  limited 
area  of  a  small  State,  is  not  to  be  accepted  as  an 
evidence  of    its  practicability.     Local  losses  thus 


122  RAILWAY  BATES 

engendered  may  be  overcome  elsewhere.  If  made 
general,  such  recuperation  would  be  impossible. 

Business  takes  on  the  loeculiarities  of  those  who 
handle  it.  In  our  progressive  country,  the  special, 
or  discriminatory,  rate  of  to-day  becomes  the 
standard  of  to-morrow.  The  tendency  of  rates  is 
downward.*  Against  this  all  the  resistance  of  cor- 
porate forces  is  directed  to  counteract  contrary 
efforts  on  the  part  of  the  public.  To  the  extent  that 
reduction  is  practicable  or  necessary,  it  is  unavoid- 
able. But  to  precipitate  it  heedlessly  is  to  disturb 
the  commercial  interests  of  a  country  and  retard  its 
growth. 

It  is  assumed  by  those  who  inveigh  against  car- 
riers fixing  rates,  that  the  power  is  used  imx)roperly. 
Ignorance,  here  as  elsewliere,  is  critical,  susi)icious, 
credulous,  intolerant,  unjust.  Undoubtedly  acts  of 
injustice  have  been  perj)etrated;  foolish  things  have 
been  done;  unwise  measures  enforced.  But  this 
was  to  be  expected.  Are  we  to  condemn  a  just  and 
necessary  thing,  because  it  is  sometimes  attended 
with  wrong  ?  We  often  have  rain  when  we  do  not 
want  it,  and  our  crojDS  are  scorched  by  the  sun.  But 
do  we  inveigh  against  rain  and  sun  because  of  this  ? 
No.  They  are  the  accompaniments  of  generally 
beneficent  laws  And  so  it  is  in  regard  to  the  dis- 
cretion of  railroad  managers  to  make  rates,  special 
and  otherwise.  Misuse  in  isolated  instances  does 
not  X)i"ove  that  its  exercise  is  not  generally  beneficial. 
It  is.     It  everywhere  quickens  the  seed  of  com- 


*It  is  based  on  increase  of  business,  increased  skill,  and  height- 
ened facilities,  etc.,  etc. 


AND  GOVERNMENT  CONTROL.  123 

merce,  causing  it  to  flourish  where  it  would  other- 
wise remain  unfruitful. 

Mutuality  of  interest,  the  practice  of  enlightened 
selfishness,  is  the  sustaining  and  perpetuating  influ- 
ence that  governs  commercial  afl'airs,  and  has  been 
in  every  age.  It  compels  the  carrier,  while  fixing 
his  charge,  to  regard  his  partners,  the  producer  and 
consumer.  It  modifies  the  rule  of  life  that  leads  us 
to  take  all.  Except  for  the  exercise  of  this  prin- 
ciple, business  could  not  be  done,  properties  and 
trade  would  languish.  It  is  strengthened  and  per- 
petuated by  competitive  practices,  by  the  absence  of 
monopoly.  These  last  are  in  themselves  determin- 
ing causes,  and  in  transj^ortation  matters  fix  the 
price  as  absolutely  as  comj^etition  fixes  the  x>rice  of 
calico.  Like  other  traders,  the  efforts  of  carriers 
are  directed  to  increasing  their  j^rofits  by  adding  to 
their  business.  Their  aim  in  making  rates  is  to 
obtain  the  medium  "between  an  excessively  high 
and  an  excessively  low  charge,  where  the  product  of 
the  rate  and  the  volume  of  the  trafiic  will  be  the 
maximum. ' '  * 

Contention  in  regard  to  special  and  so-called  dis- 
criminatory rates  is  not  confined  to  the  United 
States,  but  is  common  to  every  country.  In  Eng- 
land the  law  provides  a  maximum  rate.  Heretofore 
this  rate  has  been  greatly  in  excess  of  the  rate  used. 
The  carrier  has  thus  been  left  free  to  charge  all  the 
traflac  would  bear.  This  is  the  only  just  or  practicable 
basis  of  rates;  the  only  one  that  is  free  from  criti- 
cism or  abuse.     Its  equities,  however,  are  not  gene- 


*W.  D.  Dabney,  "  The  Public  Regulation  of  Railways,"  page  91. 


124  RAILWAY  RATES 

rally  understood;  its  use  is  thought  to  be  attended 
with  favoritism.  "There  has  always  been  a  feud 
between  the  railways  and  a  section  or  sections  of  the 
community  whom  they  serve,  in  respect  to  real  or 
supposed  inequality  of  treatment,  as  between  dif- 
ferent districts  and  different  individuals.  The  feud 
is  as  unsettled  and  as  keen  to-day  as  it  was  in  the 
infancy  of  the  system.  It  is  found  to  prevail 
wherever  railways  have  been  established.  It  has 
everywhere  i)resented  similar,  if  not  quite  the  same, 
phases,  and  it  has,  in  the  great  majority  of  cases, 
been  found  incax)able  of  solution  or  settlement. 
.  .  Railway  comi)anies  make  no  secret  of  the  fact 
that  in  the  entire  absence  of  competition  they  are 
accustomed  to  charge  higher  rates  than  they  usually 
do  when  they  have  competition  to  meet.*  Their 
justification  is,  of  course,  that  if  they  did  not  quote 
lower  competitive  rates,  in  the  latter  case,  they 
would  lose  the  traffic  entirely.  They  deny  that  the 
acquisition  of  such  traffic  by  such  differentiation  is 
an  injustice  to  anyone.  The  ordinary  trader  would 
not,  they  say,  secure  any  lower  rates,  even  if  these 
special  rates  were  not  quoted.  Nay,  they  go  still 
further,  and  maintain  the  fact  of  their  being  able 
thus  to  secure  otherwise  doubtful  traffic  by  quoting 
specially  low  rates  is  a  positive  advantage  to  the 
regular  traders,  whose  rates  are  normal,  because  the 
greater  the  volume  of  traffic  over  which  the  working 

*No  well-informed  railway  owner  or  agent  ever  admitted  that 
the  traffic  of  a  railway  was  in  any  case  free  from  the  restraining 
influences  of  competition.  It  is  more  intense  in  some  instances  than 
in  others.    That  is  all  the  difference. — M.  M.  K. 


AND  GOVERNMENT  CONTROL.  125 

cost  is  spread,  the  larger  will  be  the  amount  of 
net  revenue  available  for  distribution — for  creating 
additional  facilities,  for  generally  lowering  rates, 
and  for  dividend  purposes. ' '  * 

Such  are  the  beliefs  of  Englishmen.  They  are  the 
same  everywhere.  The  laws  of  England  prohibit 
unjust  discrimination.  They  provide  that  tolls  shall 
be  "at  all  times  charged  equally  to  all  persons  and 
after  the  same  rate,  whether  per  ton,  per  mile,  or 
otherwise, "t  and  that  "no  reduction  or  advance  in 
any  such  tolls  shall  be  made,  either  directly  or  indi- 
rectly, in  favor  of  or  against  any  particular  company 
or  person.":}:  But  these  laws,  like  all  theoretical 
laws  not  in  harmony  with  the  good  of  mankind,  are 
not  enforced,  are  a  dead  letter.  They  are  statutory 
monuments  of  ignorance  and  affected  solicitude. 
"It  is  not  pretended  that  these  enactments  have 
been  scrupulously  observed.  On  the  contrary,  they 
are  broken  every  day,  by  nearly  every  railway  com- 
pany in  the  United  Kingdom.  Their  strict  observ- 
ance has,  in  effect,  been  declared  to  be  impossible 
even  by  commissions  and  committees  appointed  (by 
the  government)  to  inquire  into  their  operation.  . 
.  .  It  has  been  much  the  same  on  the  continent 
of  Europe.  In  March,  1887,  the  French  Chamber 
of  Deputies  held  fourteen  different  sittings  on  this 
question.  .  .  .  Many  specific  examples  of  the 
evil  of  discrimination  were  quoted.  One  of  the 
most  important  was  that  of  the  transport  of  corn, 

*J.  S.  Jeans,  "Railway  Problems." 
t  Ibid. 
X  Ibid. 


126  SAIL  WAT  RATES 

which  is  carried  from  Dunkirk  to  Paris  for  eleven 
francs,  eighty-five  centimes,  although  the  charge 
made  for  inland  transport  over  the  same  distance — 
from  Chateauroux  to  Paris — was  four  and  one-half 
francs  more.  .  .  ,  The  railways  of  Great  Britain 
are  perhaps  more  liable  to  the  sin  of  discrimination 
than  those  of  any  other  European  country.  Our 
import  trade  is  much  larger  and  more  varied.  We 
have  a  multitude  of  industrial  and  commercial 
interests  constantly  pressing  for  consideration. 
The  number  of  rates  is  consequently  legion.  The 
London  &  North- Western  company  alone  are  said 
to  have  twenty  millions  of  them.  The  avowed  x^rin- 
ciple  of  railway  traffic  managers — to  impose  on  the 
traffic  such  rates  as  it  will  bear — is  a  principle  of 
discrimination.  There  is  no  pretence  of  charging 
rates  according  to  the  cost  of  service."* 

The  experiences  of  England  find  an  echo  in  Amer- 
ica, in  France,  in  every  country  where  railroads  ex- 
ist. They  represent  the  actualities  of  business,  the 
forces  that  animate  commercial  affairs,  and  without 
which  it  would  not  be  carried  on.  Those  who  con- 
demn them  are  not  so  dishonest  as  ignorant,  not  so 
malicious  as  foolish. 

Objection  to  special  rates  frequently  arises  from  a 
belief  that  they  do  not  enlarge  or  simplify  business, 
but  complicate  it;  that  in  giving  ex^Dression  to 
them,  railroads  are  not  animated  so  much  by  a  de- 
sire to  make  money  as  public  carriers,  as  by  private 
contrivance.  In  the  main,  however,  those  who  ob- 
ject to  them  are  the  unsuccessful  in  business  life — 


J.  S.  Jeans,  "  Railway  Problems." 


AND  GOVERNMENT  CONTROL.  127 

the  ne'er-do-wells.  In  tlieir  jealousy  we  see  the 
specious  demagogism  of  equality.  They  repre- 
sent the  craze  for  uniformity;  that  kind  of  uni- 
formity that  would  disregard  principles  and  reduce 
everything  to  a  common  level;  that  places  men  and 
things  on  an  equality  without  regard  to  natural 
conditions;  that  believes  great  interests  should  be 
brought  down  to  the  level  of  small  ones;  that  the 
country  is  benefited  by  pulling  men  down  to  the 
meanest  level;  that  minimum  ventures  should  be 
made  the  standard;  that  mediocrity  and  common- 
l^lace  are  the  real  bases  of  affairs,  the  real  main- 
spring of  a  country's  greatness. 

There  can  be  no  doubt  but  that  much  of  the  mis- 
apprehension that  has  existed  regarding  discrimina- 
tory rates  is  due  to  maliciously  inclined  men — to 
those  who  do  business  in  a  small  way,  or  are  jealous 
of  the  wealth  and  enterprise  of  those  about  them. 
The  misrepresentations  of  these  men  have  been 
taken  \x\)  seriously  by  the  ignorant.  Demagogues 
have  also  made  the  subject  a  rallying  cry.  The  Inter- 
state Commerce  Commission  of  the  United  States, 
made  up  of  as  able  and  fair  men  as  we  have,  was 
deceived  in  its  early  history  in  regard  to  the  scope 
and  value  of  special  rates.  ' '  The  public  very  well 
understood  that  jprivate  arrangements  were  to  be 
had  if  the  proper  motives  were  presented.  .  .  . 
It  was  in  the  power  of  the  general  freight  agent  to 
place  a  man  or  a  community  under  an  immense  obli- 
gation by  conceding  a  sx)ecial  rate  on  one  day,  and 
to  nullify  the  effect  of  it  on  the  next  by  doing  even 
better  by  a  competitor.     .     .     .     Special  favors  or 


128  RAILWAY  RATES 

rebates  to  large  dealers  were  not  always  given 
because  of  any  profit  which  was  anticipated  from 
the  business  obtained  by  allowing  them;  there 
were  other  reasons  to  influence  their  allowance.  It 
was  early  perceived  that  shares  in  railroad  corpora- 
tions were  an  enticing  subject  for  -speculation,  and 
that  the  ease  with  which  the  hopes  and  expectations 
of  buyers  and  holders  could  be  operated  upon, 
j)ointed  out  a  possible  road  to  speedy  wealth  for 
those  who  should  have  the  management  of  the  roads. 
For  speculative  i^urposes,  an  increase  in  the  volume 
of  business  might  be  as  useful  as  an  increase  in  net 
returns;  for  it  might  easily  be  made  to  look,  to  those 
who  knew  nothing  of  its  cause,  like  the  beginning 
of  great  and  increasing  prosperity  to  the  road.  But 
a  temporary  increase  was  sometimes  worked  up 
for  still  other  reasons — such  as  to  render  i)lausible 
some  demand  for  an  extension  of  line,  or  for  some 
other  great  expenditure.  .  .  .  Whatever  was 
the  motive,  the  allowance  of  the  special  rate,  or 
rebate,  was  essentially  unjust  and  corrupting;  it 
wronged  the  smaller  dealer,  oftentimes,  to  an  extent 
that  was  ruinous."  *  I  do  not  believe  that,  after 
actual  acquaintance  with  the  practices  of  railroads, 
and  the  needs  of  commerce,  the  Commission  would 
re-assert  this;  that  its  present  members  believe 
to-day  that  personal  reasons,  or  corrupt  motives, 
influence,  or  ever  have  influenced,  carriers  in  making 
special  rates,  or  allowing  drawbacks,  to  any  appre- 
ciable degree.  It  was  misinformed — was  prejudiced. 
Its  opinion  was  based  on  common  rumor;  on  par- 
ticular instances,  not  on  general  practices. 


♦Interstate  Commerce  CommissioQ,  Report  1887,  page  6. 


CHAPTER    VII, 

NECESSITY   AND   VALUE   OF   POOLS. 

Railway  critics  delight  to  loarticularize;  to  exag- 
gerate isolated  occurrences.  They  make  much  of 
individual  Instances.  The  pictures  they  draw  are 
repulsive,  exaggerated,  and  untrue.  Railway  own- 
ers and  managers  are  not  different  from  other  men. 
Nor  can  we  reflect  uj)on  them  as  a  class.  If  one  of 
them  does  wrong,  let  him  be  i)unished.  But  let  us 
not  damn  the  whole  railway  world  or  uproot  our 
commercial  system,  because  a  particular  man  goes 
astray.  The  trade  of  the  world  should  not  be  crip- 
pled because  one  of  its  operatives  is  unfaithful. 
The  detection  and  punishment  of  such  acts  afford  a 
legitimate  and  proper  field  for  the  officials  of  the 
State.  Here  they  may  perforin  a  service  much  more 
valuable  to  the  community  than  sending  traffic  man- 
agers to  jail  because  of  over-zeal  in  behalf  of  their 
employers.  Such  acts  do  not  merit  so  severe  a  pun- 
ishment. They  are,  in  the  main,  to  be  commended, 
because  based  on  commendable  traits,  loj^alty  to 
their  emj)loyers,  business  activity,  commercial  enter- 
prise, progress,  thrift.  They  are  overgrown  virtues, 
to  be  regulated,  iDerhaps,  but  not  punished.  The 
arbitrary  lines  it  is  sought  to  drnw  around  railway 
officials,  and  the  disposition  there  is,  to  make  of- 
fenses common  to  trade  criminal,  in  their  case,  suggest 

9  (129) 


130  RAIL WA  Y  RA TE8 

that  the  punishment  meted  out  by  public  oiDinion 
and  legislative  enactment,  is  not  evenly  distributed. 
It  is  superficial  and  partial.  It  does  not  go  back  of 
the  act.  Thus,  rate  wars  of  carriers  are  attributed 
wholly  to  the  instability  of  their  managers;  to  their 
jealousy  of  each  other;  to  the  super-serviceable  ac- 
tivity of  subordinates.  These  are  factors  only,  to 
be  commended  and  encouraged.  They  animate  every 
man  in  commercial  life,  and  a  people  that  does  not 
possess  them  is  wanting  in  business  skill,  and  com- 
mercial enterprise  is  dead.  They  are  part  and  par- 
cel of  trade,  and  add  to  its  picturesqueness  and 
l)iquancy.  When  they  become  obsolete  or  criminal, 
men  will  go  out  of  business  and  commerce  will  die. 

Much  that  is  said  against  railroads  is  personal, 
the  outgrowth  of  ignorance,  pique,  envy,  jealousy, 
hatred.  It  is  not  easy  to  detect,  however,  because 
covered  up  by  a  pretence  of  fairness,  a  specious  re- 
gard for  the  interests  of  the  people,  a  desire  to  pro- 
tect them. 

Railway  criticism  is  diversified.  Much  that  is 
written  is  by  honest  but  ignorant  men;  much  by 
those  who  are  prejudiced;  much  by  stupid  people; 
much  by  those  who  seek  ]3urposely  to  mislead.  The 
right  of  railroad  managers  to  make  rates  is,  es- 
pecially, an  object  of  attack.  Critics  see  in  it  the 
enslavement  of  the  people,  injustice,  favoritism, 
corruption,  the  exercise  of  arbitrary  power.  There 
is  no  propriety  or  justice  in  such  criticism.  As  well 
might  we  inveigh  against  merchants  putting  a  price 
on  their  goods,  or  farmers  saying  what  they  will 
take  for  their  products.    No  one  whose  interests  are 


AND  GOVERNMENT  CONTROL.  ISl 

diversified  receives  a  uniform  i)rice  for  his  x)roducts. 
Profits  are  greater  in  some  instances  than  in  others. 
There  is  more  made  in  raising  one  thing  than  an- 
other. Producers  must  sometimes  sell  at  a  loss. 
The  law  of  supply  and  demand  fixes  the  price.  But 
if  we  were  compelled  to  sell  at  a  loss  iDerpetually, 
production  would  cease.  And  so  it  is  with  rail- 
roads. The  products  they  carry  have  a  price  fixed 
uj)on  them  by  the  free  and  harmonious  action  of 
the  world — producer,  consumer,  middleman,  and 
carrier.  The  price  is  governed  by  a  law  as  immu- 
table as  that  of  gravitation.  But  everyone  does  not 
know  this. 

The  acts  of  railroads  are  more  often,  misunder- 
stood than  otherwise.  Their  wars  are  an  instance. 
These  exceptional  incidents  afford  an  inexhaustible 
theme.  While  deplorable,  they  have  not  been  alto- 
gether bad.  Out  of  them  the  community  and  the 
carrier  have  derived  some  good.  They  have  served 
to  illuminate  and  clear  the  sky.  While  temporarily 
disturbing  values,  the  harm  they  have  done  has 
been  partially  offset  by  the  benefits  that  have  fiowed 
from  them.  They  are  the  outgrowth  of  a  too  ex- 
uberant life,  a  superabundant  vitality;  a  plethora 
of  energy,  interest,  and  ambition.  Such  strife  pre- 
vails wherever  men  barter,  wherever  they  own  i)rop- 
erty,  wherever  they  trade.  It  is  not  permanently 
harmful.  It  quickens  man's  impulses,  widens  his 
observation,  adds  to  his  resources,  makes  him  more 
adaptable.  If  anyone  disbelieves  this,  let  him  com- 
pare the  progress  of  railway  industry  in  America 
with    other   countries,   where  a  steady,    plodding 


132  RAIL  WA  Y  RA  TE8 

conservatism,  unnatural  to  trade,  governs  railway 
operations. 

What  is  abnormal  in  progressive  railway  enter- 
prise to-day  becomes  normal  to-morrow,  if  its  effect 
is  generally  beneficial.  Men,  if  left  unimpeded, 
strive  to  attain  that  which  is  most  generally  de- 
sired. Railway  owners  and  managers  are  no  ex- 
ception to  this  rule.  The  j)Liblic  demands  a  low  rate 
and  an  efficient  service.  This  is  the  goal  carriers 
have  before  them.  They  will  attain  it  if  not  handi- 
capped; they  will  not  attain  it  if  they  are.  Per- 
sonal responsibility  animates  them  as  it  does  other 
men;  rob  them  of  responsibility,  and  you  destroy 
their  ambition  and  interest,  lose  the  fruits  of  their 
creative  talent. 

In  the  ox)eration  of  railways,  the  tendency  of  rival 
companies  is  to  share  in  common  the  duties  and 
exjoenses  of  traffic  agencies  located  off  the  line,  to 
reduce  the  number  of  such  agencies,  to  prevent 
undue  strife  for  business  because  of  over-zeal  and 
the  suspicions  engendered  by  shippers  and  others, 
to  economize.  The  spirit  is  worthy  of  recognition 
and  encouragement. 

It  is  important  that  carriers  should  receive,  gen- 
erally, a  fair  rate  for  their  services.  Every  depres- 
sion is  more  or  less  permanent,  so  that  if,  through 
strife  or  outside  interference,  abnormal  action  is 
taken,  it  becomes  to  a  certain  extent  normal.  If  not 
regulated,  therefore,  it  is  only  a  question  of  time 
when  x)rox)erties  thus  affected  will  cease  to  be 
remunerative;  when  they  will  be  bankrupted;  when 
they  will  become  a  burden  to  the  community.     For 


AJS'D  GOVERNMENT  CONTROL.  133 

these  and  otlier  reasons  they  should  be  encouraged 
to  form  such  combinations  as  may  be  necessary  to 
mitigate  strife.  One  of  these  means  is  tlie  practice 
of  j)ooling — the  right  of  carriers  to  enter  into  traffic 
agreements  with  each  otlier.  The  exercise  of  the 
right  menaces  no  one.  It  is  accorded  every  other 
trader  in  the  world.  Business  would  not  be  done  if 
it  Avere  denied.  It  should  not  be  withheld  from 
railroads.  Wherever  it  is  practical,  consolidation 
will  follow,  if  the  restriction  cannot  be  evaded  other- 
wise. To  prevent  railroads  from  entering  into  an 
arrangement  with  each  other  to  mitigate  strife,  is  to 
force  them  to  amalgamate.  It  is  the  only  resource 
left  them — their  only  escaj)e  from  ruin.  If,  there- 
fore, governments  do  not  wish  to  have  their  rail- 
ways consolidated,  if  there  is  any  benefit  in  separate 
organizations,  as  there  is,  this  concession  must  not 
be  denied. 

What  the  effect  of  the  general  consolidation  of 
railroad  interests  would  be,  no  one  can  tell.  It  is 
not  probable  that  the  interests  of  the  people  would 
be  menaced  thereby,  if  not  carried  to  the  point  of 
monopolizing  sources  of  supply;  if  not  world-wide. 
So  long  as  this  is  not  done,  competitive  markets  will 
influence  the  price  of  products  and  the  rates  of  car- 
riers. But  not  to  the  extent  that  they  do  at  pres- 
ent. Should  the  railroads  of  a  country  be  consoli- 
dated, it  should  be  attended  with  carefully  systema- 
tized methods  of  administration,  impersonal  in  their 
nature  and  not  dependent  upon  men  or  parties. 
Organization  should,  in  fact,  in  such  cases  be  con- 
ducted practically  upon  the  same  lines  as  that  of 


134  BAIL  WA  Y  RA  TES 

a  constitutional  government.  Otherwise  there  is 
danger  of  its  lacking  efficiency  or  becoming  other- 
wise objectionable. 

The  processes  of  competition  are  so  obscure  and 
subtle  as  to  elude  effort  to  describe  them  in  detail. 
Every  case  possesses  features  i3eculiar  to  itself  that 
must  be  especially  considered.  No  rule  applies 
with  the  same  force  or  to  the  same  extent  in  any 
two  cases.  Adjustment  attends  every  case  to  the 
extent  necessary  to  secure  the  desired  end.  It  is 
this  feature  that  makes  the  arbitrary  efforts  of  gov- 
ernments to  regulate  rates  fatal  to  the  material 
interests  of  a  community.  Its  futility  is  especially 
apparent  in  the  attempt  to  classify  railroads,  limit- 
ing each  to  a  rate  corresponding  to  its  assumed 
necessities  or  the  amount  of  its  business.  Nothing 
could  be  more  fallacious.  Competitive  rates  must 
be  the  same  for  neighboring  properties,  no  matter 
what  their  necessities.  To  reduce  a  rate  arbitrarily, 
on  a  well-established  line,  involves  a  corresponding 
or  even  greater  reduction  on  the  lines  of  its  less  for- 
tunate neighbors.  In  fixing  the  rate  for  one  line, 
we  fix  it  for  all  competing  lines. 

Under  comi)etitive  practices,  rates  are  not  based 
on  the  requirements  of  particular  properties.  This 
is  why  j)ooling  the  business  common  to  two  or  more 
lines  does  not  result  in  harm  to  the  community. 
Without  this  device,  the  value  of  such  traffic  is 
greatly  lessened  to  the  carrier,  while  the  resultant 
warfare  greatly  injures  the  shipper.  The  value  of 
competitive  traffic  is,  in  many  instances,  wholly 
destroyed  by  the  warfare  it  engenders.     This  war- 


AND  GOVERNMENT  CONTROL.  135 

fare  does  not  manifest  itself  alone  in  rate-cutting, 
but  in  the  employment  of  unnecessary  agents,  in 
expenditures  for  advertising,  undue  multiplication 
of  trains,  and  other  expensive  elaborations.  The 
traffic,  moreover,  occupies  oftentimes  the  equip- 
ment of  railway  companies  to  the  exclusion  of  other 
and  more  valuable  business.  It  also  in  many  cases 
affects  prices  at  the  disturbed  points  so  greatly  and 
rapidly  as  to  render  it  impossible  for  merchants  and 
manufacturers  to  determine  the  market  value  of 
their  goods  in  advance,  making  it  impossible  for 
them  to  meet  the  requirements  of  trade  and  the 
competition  of  other  markets  and  industrial  centers. 

The  pooling  system,  however  crude,  has  been  of 
great  value  to  railway  companies  and  the  public. 
It  will  become  more  valuable  as  it  is  better  under- 
stood and  the  machinery  for  governing  it  is  per- 
fected. In  order  to  secure  its  highest  utility,  it 
should  receive  the  protection  of  the  government. 
The  expediency  or  wisdom  of  throwing  around  it 
this  protection  is  disputed  in  the  United  States. 
But  that  it,  or  some  equally  effective  measure,  must 
be  adopted  sooner  or  later,  there  can  be  no  doubt, 
if  the  necessities  of  the  country,  rather  than  its 
imaginary  or  romantic  wants,  are  to  be  considered. 

The  theory  and  practice  of  the  railway  pool  is 
right  in  princix)le  and  beneficent  in  practice.  Its 
benefits  greatly  outweigh  its  disadvantages.  These 
latter  are  not  inherent.  They  grow  out  of  uncer- 
tainties in  regard  to  the  duration  of  pools  (when  not 
sanctioned  by  the  State),  and  the  ability  of  mana- 
gers to  break  them  at  will,  coupled  with  the  desire 


136  RAILWAY  RATES 

of  carriers  to  build  up  a  fictitious  business  upon 
wliicli  to  predicate  further  claims. 

As  I  have  already  stated,  pools  do  not  increase  the 
rate,  nor  render  an  unfair  rate  possible.  They  simply 
add  to  the  permanency  of  such  rate  as  a  business  war- 
rants, and  prevent  the  product  of  the  rate  from 
being  wasted  in  unnecessary  expenses.  Undue  re- 
duction of  rates  has  been  largely  occasioned  in  the 
United  States  by  excessive  railway  construction. 
Where  one  property  would  have  answered,  two  or 
more  have  been  built.  Under  such  conditions,  if 
carriers  are  not  allowed  to  make  an  equitable  divis- 
ion of  traffic,  they  will  covertly  cut  under  each  other, 
in  order  to  ol)tain  what  they  term  their  share.  In 
the  strife  thus  engendered,  the  modicum  of  p)rofit 
the  business  should  afi:'ord,  is  frittered  away. 

Wherever  railroads  are  controlled  by  the  govern- 
ment, rate-cutting  is  prohibited.  In  Russia,  where 
the  government  guarantees  the  interest  on  the  money 
invested  in  railways,  competition  is  i^rohibited. 
When  traffic  is  competitive,  rates  must  be  the  same 
on  all  railroads  or  the  business  must  be  divided. 
The  iDool  which  we  prohibit  they  enforce.  And  here 
we  see  the  difference  between  theory  and  practice. 
It  is  tlie  difference  between  spending  your  own 
money  and  your  neighbor's.  Wherever  the  govern- 
ment owns  a  railroad,  it  is  more  rapacious  than  the 
most  grasping  individual.  Where  it  exercises  a 
supervision,  it  is  more  unreasonable  than  the  most 
exacting  shipper. 

The  value  of  a  stable  rate  is  generally  recognized. 
Commercial  affairs  require  definiteness;  ability  to 


AND  QOVEUNMENT  CONTROL.  137 

forecast  the  future.  "Rate  wars  are  as  unsettling 
to  the  business  of  the  country  as  they  are  mischiev- 
ous to  the  carriers."*  An  unfortunate  feature  of 
rate-cutting  is  the  disj)osition  of  governments  to 
make  such  rates  nominal,  to  base  tariffs  thereon,  to 
act  arbitrarily  in  the  matter.  ' '  No  carrier  has  any 
ground  for  just  complaint  if  its  published  rates  are 
reduced  by  the  authorities  to  the  standard  of  the 
average  it  accei)ts.""f  I  am  lolh  to  believe  that  this 
will  be  the  guiding  principle  of  our  great  commis- 
sion; tliat  exceptions  are  to  be  made  the  rule;  that 
the  mistakes  of  carriers  are  to  be  made  the  standard 
of  their  government;  that  the  good  that  grows 
oat  of  their  rivalry  is  not  to  mitigate  against  their 
indiscretions. 

The  instincts  of  carriers  are  those  of  traders;  such 
as  the  strife  of  men  engenders.  They  should  not  be 
punished  or  judged  too  severely.  Business  men  can 
not  be  gauged  by  the  standard  of  interest  clerks,  but 
by  the  si)irit  of  enterprise  and  x^rogressiveness  in- 
herent in  men  who  achieve  great  ends.  ' '  During  the 
summer  last  j)ast,  the  commission  had  occasion  to 
make  inquiries  into  the  j)roper  charge  to  be  made 
by  the  carriers  of  the  northwest  for  the  transporta- 
tion of  food  products  in  that  section  of  the  country, 
and  in  doing  so  it  endeavored,  amongst  other  things, 
to  ascertain  what  the  carriers  were  actually  receiv- 
ing; that  is  to  say,  not  merely  what  the  rate  sheets 
showed,   but  what  they  collected  from   shippers. 


*"  Fourth  Annual  Report   Interstate   Commerce    Commission," 
page  21. 

f  Ibid,  page  31 , 


138  R^^IL  WA  Y  RATES 

Those  members  of  the  commission  who  conducted 
the  investigation,  became  satisfied  that  the  pub- 
lished rate  sheets  were  not  adhered  to,  and  it  made 
a  decision  reducing  the  nominal  rates."  * 

This  decision  was  more  sx3ecious  than  fair.  It  was 
unfortunate.  It  made  the  exce^^tion  of  the  moment 
the  standard  of  the  general  rule.  How  long,  I 
ask,  would  the  progressive  spirit,  the  enterprise 
and  ambition  of  carriers,  to  whom  we  owe  our  mag- 
nificent railway  system,  be  kept  uj),  if  arbitrary 
interference  of  this  kind  upon  the  part  of  the  gov- 
ernment was  to  be  the  rule  ?  If  men' s  mistakes  and 
weaknesses  were  to  be  made  the  basis  of  their  lives, 
the  fulfillment  of  their  fortunes  ?  Men  will  not  do 
business  on  such  basis;  will  not  invest  money  under 
such  conditions.  The  government  must  be  neutral; 
must  be  fair  and  frank.  The  claim  that  "  the  rates 
that  are  now  being  charged  by  railroad  manage- 
ments are,  for  the  most  jDart,  such  as  have  been 
fixed  by  the  roads  themselves,  under  the  stress  of 
severe  competition,  and  if  they  are  less  remunera- 
tive than  the  roads  desire,  or  deem  necessary  for 
just  compensation,  the  responsibility  for  the  situa- 
tion rests  mainly  ux^on  themselves, "f  does  not  ex- 
cuse arbitrary  and  unjust  lowering  of  rates  by  the 
government.  If  the  strife  of  carriers  result  ]3erma- 
nently  in  lower  rates,  the  hardship  is  self-inflicted, 
and,  therefore,  not  altogether  unjust.  It  is  in 
accordance  with  the  evolutions  of  trade — its  vicissi- 


*"  Fourth  Annual  Report  Interstate  Commerce  Commission," 
page  23. 

\  Ibid,  page  28, 


AND  GOVERNMENT  CONTROL.  139 

tudes— at  once  natural  and  consequential.  It  is 
vastly  different  from  arbitrary  acts  of  interference 
by  the  government,  carrried  on  without  reference 
to  the  natural  and  necessary  processes  of  adjust- 
ment that  attend  similar  action  upon  the  jjart  of 
the  railroads  themselves.* 

The  tendency  of  rates  in  the  United  States,  where 
pools  have  existed,  has  been  steadily  downward. 
This  has  been  demonstrated  time  and  again.  It 
arises  joartly  from  the  fact  that  railroads  are  i)ro- 
gressive,  and  partly  from  the  fluctuations  of  com- 
merce. The  latter  fix  the  rate  here,  as  in  other 
cases.  This  truth  is  not  generally  known,  or  is 
ignored. 

If  the  principles  upon  which  competitive  rates  are 
based  could  be  made  clear  to  the  community,  the 
apprehension  with  which  it  views  railway  pools 
would  die  out. 

Pools  J)  re  vent  unjust  discrimination  as  between 
individuals,  because  they  lessen  the  motive  of  the 
carrier  to  draw  business  away  from  his  rival  by 
undue  concessions.  They  also  prevent  wide  and 
sudden  fluctuations  in  prices.  The  ethics  of  govern- 
ment require  that  laws  to  prevent  wrong,  should 
remove,  so  far  as  possible,  the  incentive  thereto. 
The  pool  does  this.  It  is  both  a  protective  and  a 
preventive  measure.  Equitable  rates  can  not  be 
maintained  under  certain  circumstances  without  it. 


*  Since  the  action  of  the  Interstate  Commerce  Commission,  in 
1890,  its  personnel  has  changed.  Moreover,  its  action  at  that  time 
was  suggested  by  the  law.  The  law  requires  overhauling.  It 
attempts  too  much.  While  admirable  in  some  respects,  it  is  defective 
in  others. 


140  RAIL  WA  T  BA  TE8 

It  represents  the  adjustment  of  a  part  to  the  whole; 
the  i^rinciple  of  equal  distribution  and  harmonious 
adaptation.  It  is  based  on  equality  and  justice. 
"The  governments  of  Central  Europe  liave  given  up 
trying  to  i)rocure  obedience  to  these  x^rinciples  by 
simjDle  prohibitory  laws,  such  as  are  occasionally 
]3roposed  in  Congress.  To  secure  obedience,  they 
talve  away  the  temptation  to  violate  it.  This  they 
have  found  can  only  be  done  by  pooling.  This  is, 
accordingly,  legalized  and  enforced.  It  is  carried 
on  to  an  extent  undreamed  of  in  America.  They 
have  both  traffic  pools  and  money  pools.  There 
are  i)ools  between  State  roads  and  private  roads, 
between  railroads  and  water  i  outes.  It  is  regarded 
as  a  perfectly  legal  thing  that  one  road  should  pay 
another  a  stated  sum  of  money,  in  consideration  of 
the  fact  that  the  latter  abstain  from  comjDeting  for 
the  through  traffic  of  tlie  former.  .  .  .  With 
all  the  police  power  that  the  German  government 
controls — a  power  a  hundredfold  greater  than  any- 
thing we  have  in  this  country — and  with  all  its 
dread  of  irresponsible  combinations,  it  sees  that 
pools  are  not  a  thing  that  can  be  prevented;  that 
the  only  way  to  control  them  is  to  recognize  them 
as  legal,  and  then  hold  them  responsible  for  any 
evils  which  may  arise  under  their  management. 
The  sooner  we  reach  the  same  conclusion  in  Amer- 
ica, the  better  for  all  parties  concerned.  The 
attempt  to  bury  the  difficulties  by  thrusting  our 
own  heads  into  the  sand,  has  already  lasted  too  long. 
We  must  face  the  inevitable  as  inevitable,  and  do 
the  best  we  can  to  regulate  it.    To  meet  the  difFicul- 


AND  OOVEHNMENT  CONTROL.  141 

ties  successfully  will  be  a  hard  problem.  But  to 
evade  them  has  been  an  impossible  one."* 

Pooling  is  a  well-recognized  procedure  of  business 
in  England,  valuable  alike  to  the  carrier  and  the 
State.  Its  operations  are  most  prolix,  penetrating 
every  incident  of  local  competitive  ^iractice.  Let  us 
take  an  example:  "We  will  suppose  that  there  is 
a  certain  traffic  to  be  conveyed  between  two  towns 
or  districts,  and  that  there  are  two  or  more  railway 
companies,  each  having  a  route  of  its  own  by  which 
it  is  enabled  to  compete  for  the  trafSc.  An  agree- 
ment is  come  to  that  the  receipts  derived  from  the 
whole  of  the  traffic,  carried  by  all  routes,  shall  be 
thrown  into  a  common  fund,  and  that  each  company 
shall  be  entitled  to  a  certain  percentage  of  the 
whole,  say,  for  example,  fifty  per  cent,  to  the  com- 
pany having  the  best  route,  thirty  per  cent,  to  the 
second,  and  twenty  per  cent,  to  the  third.  The  per- 
centages are  usually  adjusted  on  the  basis  of  x)ast 
actual  carryings,  but  in  settling  the  terms  of  the 
agreement,  due  weight  is  accorded  to  any  prospec- 
tive advantages  which  may  entitle  one  company  to 
claim  a  larger  proportion  than  it  has  carried  in  the 
past.  An  agreed  allowance  for  working  expenses  is 
made."t 

Man  is  suspicious  —  a  creature  of  experiences. 
He  lives  much  in  the  past.  He  is  always  trying  to 
trace  analogies  between  what  is  and  what  has  been. 
Thus,  he  compares  the  pools  of  to-day  with   the 


*A.  T.  Hadley,  "Railroad  Transportation,"  pages  249  and  81. 
f  Colonel  George  Fiudlay,    "  The  Working  and  Management  of 
an  English  Railway." 


142  RAIL  WA  Y  RA  TE8 

monopolies  of  past  centuries;  with  the  guilds  of  the 
Middle  Ages,  the  outgrowth  of  favoritism  and  the 
creatures  of  oppression.  The  comparison,  however, 
is  purely  fanciful.  They  are  not  alike,  either  in 
cause  or  effect.  The  pool  is  not  a  monopoly.  It 
does  not  prevent  competition,  but  perpetuates  it 
and  adds  to  its  value.  The  benefits  that  tlie  people 
of  the  United  States  would  derive  from  tlie  estab- 
lishment and  legalization  of  pools  at  common  points 
are  multifarious.  "  It  would  allow  the  proprietors 
of  the  railroads  to  manage  their  own  affairs,  .  .  . 
and  at  the  same  time  would  restrict  the  operation  of 
each  individual  road  under  the  legalized  cooperative 
system,  to  the  extent  that  it  is  necessary,  in  order  to 
carry  out  the  intent  and  spirit  of  the  law  which  reg- 
ulates the  conduct  of  common  carriers  in  their  ca- 
pacity as  public  servants.  .  .  It  brings  unity  in 
the  management  of  railroads,  as  far  as  that  is  de- 
sirable or  necessary;  and,  at  the  same  time,  it  pre- 
serves the  individuality  of  each  road,  and  reserves 
to  it  the  management  of  all  its  local  affairs,  in  which 
it  and  the  country  through  which  it  passes  are  alone 
concerned.  Cooperation  of  the  roads  is  only  re- 
quired in  so  far  as  the  interest  of  the  whole  system 
of  roads  and  the  public  interest  requires  it — no  far- 
ther. ...  It  makes  the  separate  individual  ex- 
istence of  these  roads  possible,  and  puts  a  check 
upon  consolidation.  ...  It  secures  all  the  ad- 
vantages of  consolidation,  without  its  disadvantages. 
Instead  of  conferring  upon  and  concentrating  great 
power  in  the  hands  of  a  few,  it  has  the  contrary 


AND  GOVERNMENT  CONTROL.  143 

effect — it  will  leave  that  power  distributed  among  a 
great  many."* 

Pooling,  while  it  does  not  prevent  competition, 
modifies  its  personalities;  renders  consolidation  un- 
necessary by  removing  the  incentive;  makes  the 
strife  between  carriers  less  intense,  without  destroy- 
ing the  rivalry  that  is  so  advantageous  to  a  country. 

The  practices  that  attend  pooling  are  such  as 
circumstances  require.  They  are  mere  matters  of 
detail,  of  no  particular  interest  to  any  one  except 
the  carriers  themselves.  In  some  instances  a  divis- 
ion of  the  business  is  made  on  the  basis  of  gross 
receipts;  in  others  on  the  basis  of  the  tonnage. 
Sometimes  particular  roads  are  allowed  to  charge 
less  than  others,  because  of  the  disadvantages  of 
route,  lack  of  facilities,  etc.  Such  rates  are  called 
differential  rates.  Their  use  ' '  loresents  one  of  the 
anomalies  of  railroad  x^i'^^ctice,  which  is  that  the 
poorest  and  weakest  roads — those  least  able  to  fur- 
nish cheap  transportation— do,  in  fact,  carry  the 
competitive  traffic  at  the  lowest  charges,  and  to  a 
certain  extent  determine  the  charges  which  their 
stronger  rivals  shall  impose. "f  No  more  striking 
instance  of  the  difference  between  theory  and  XDrac- 
tice  can  be  found  than  this,  in  commercial  exj)eri- 
ence.  "It  is  not  uncommon  to  find  that  a  road  is 
able  to  compete  for  an  important  business,  but  is  at 
a  disadvantage  in  the  competition  by  reason  of 
greater  length  of  line,  or  heavier  grades,  or  of  other 

*  Argument  of  Albert  Fink  before  Committee  of  Commerce  on 
tlie  Reagan  bill,  January,  1880,  pages  22,  23. 

f  W.  D.  Dabney,  "  The  Public  Regulation  of  Railways,"  page 
148. 


144  RAILWAY  RATES 

unfavorable  circumstances,  and  that  in  consequence 
it  is  unable  to  obtain  what  it  deems  a  fair  share  of 
business  in  open  competition  with  rivals  who  offer 
the  same  rates  at  every  competing  point.  It  is 
therefore  comj^elled,  if  it  would  share  the  business, 
to  make  lower  rates,  and  the  rivals  recognize  this 
necessity,  and  allow  an  agreed  division  of  business 
between  all  competitors  to  be  effected,  by  giving  the 
carriers  thus  unfavorably  circumstanced  the  right 
to  make  rates  sufficiently  below  those  which  are 
charged  by  the  others  to  attract  a  reasonable  pro- 
j)ortion  of  the  business,"*  This  is  what  may  be 
called  natural  adjustment;  fixing  the  rates  charged 
by  the  several  roads  so  as  to  afford  each  its  share  of 
the  business.  Thus,  joarticular  lines  abstain  from 
making  a  rate  which  will  deprive  less  favored  com- 
jDetitors  of  their  portion  of  the  traffic.  If  they  did 
so,  a  war  of  rates  would  follow,  instituted  on  the 
part  of  the  weaker  lines  to  compel  the  more  favored 
companies  to  divide  the  business.  Thus  the  strong 
lines  permit  the  weak  to  make  a  rate  sufficiently 
low  to  attract  some  share  of  the  business,  f 

The  use  of  differential  rates  suggests  the  resources 
of  business  men.  They  are  at  once  simple  and  effi- 
cacious, such  as  the  practical  features  of  the  situa- 
tion require.  They  are  a  means  of  ameliorating  the 
destructive  strife  of  competition.     They  are  an  ac- 


*"  Fourth  Annual  Report  Interstate  Commerce  Commission," 
pages  23,  23. 

f  The  Grand  Trunk  Railway  of  Canada  is  allowed  to  make  a 
lower  rate  to  and  from  Boston  than  the  more  direct  east  and  west 
lines.  Yet  with  this  advantage  it  is  only  able  to  secure  a  small 
percentage  of  the  business. 


AND  OOVERNMENT  CONTROL.  145 

cessory  of  pooling.  No  one  questions  the  justness 
and  desirability  of  pooling,  who  is  familiar  with  its 
purpose  and  working.  "Pooling,  so  long  as  the 
agreements  can  be  fairly  maintained,  manifestly 
tends  to  remove  one  of  the  principal  causes  of  local 
as  well  as  personal  discrimination,  .  .  .  The 
public  benefit  derived  from  the  pooling  system  seems 
greatly  to  outweigh  the  danger  of  public  detriment 
from  its  existence."*  Not  only  is  pooling  unat- 
tended with  injury  to  the  public,  but  its  effect  is 
generally  beneficial.  It  makes  sure  what  without  it 
is  only  conjecture.  It  encourages  trade  by  making 
its  basis  secure,  by  enabling  it  to  forecast  the  future. 
"  In  the  unregulated  and  unreasoning  strife  between 
railroad  companies,  rate-cutting  is  not  only  carried 
on  to  an  extent  that  is  ruinous  to  the  comf)anies 
themselves,  but  it  becomes  a  disturbing  factor  in  all 
commerce,  and  it  is  perfectly  correct  for  the  railroad 
companies  to  say,  as  they  do  when  defending  pool- 
ing, that  unjust  indiscriminations  are  a  necessary 
result.  .  .  .  Nothing  can  be  plainer  than  the  de- 
sirability that  reasonable  rates  should  be  maintained 
with  general  uniformity,  so  that  they  may  be  calcu- 
lated ui3on  in  the  making  of  contracts  and  purchases, 
and  so  that  small  shippers  as  well  as  large,  the  man 
who  merely  sends  his  household  goods  as  well  as 
the  speculator  in  grain  and  provisions,  may  have  the 
benefit  of  tliem."t     Pooling,  moreover,  is  necessary 


*W.  D.  Dabney,  "The  Public  Regulation  of   Railways,"  pages 
151,  153. 

f  .Judge  T.  M.  Cooley,  Chairman  Interstate  Commerce  Commis- 
sion, Bdilway  Review,  January  8,  1887. 
10 


146  RAILWAY  RATES 

to  the  financial  standing  of  railroads,  to  tlie  mainte- 
nance of  their  credit;  to  the  preservation  of  their 
revenues;  to  the  keeping  up  of  their  properties;  to 
enable  them  to  furnish  needed  facilities,  to  pay  their 
employes  living  wages.  "It  can  not  possibly  be 
for  the  interest  of  any  country,  that  so  large  a 
portion  of  the  invested  capital  should  be  wasted  or 
unremunerative.  .  .  .  What  the  country  needs 
is  that  they  shall  be  made  useful;  not  that  they 
sliall  be  crij^pled  or  bankrupted . "  *  August  Schoon- 
maker,  for  many  years  a  member  of  the  Interstate 
Commerce  Commission  of  the  United  States,  sug- 
gests that  the  making  of  rates  should  be  entrusted 
to  a  federation  of  railway  officials,  the  government 
exercising  a  supervisory  j)ower :  "Federation  for 
common  purj)oses  and  to  promote  the  common  good, 
is  a  plan  api^roved  by  the  experience  of  mankind 
for  centuries.  It  is  especially  the  mode  among 
races  endowed,  like  the  Anglo-Saxon,  with  a  genius 
for  government  by  lawful  and  peaceful  means,  and 
is  illustrated  in  its  grandest  form  in  the  structure  of 
our  own  national  government." 

Federation  is  nothing  more  or  less  than  pooling; 
concerted  action  where  it  is  necessary,  independent 
action  where  it  is  not.  Federation,  while  it  might 
cover  all  traffic,  would  practically  be  enforced  only 
in  regard  to  competitive  rates.  Carriers  would,  in 
all  other  cases,  make  such  rates  as  they  pleased. 
Indeed,  the  carrier  x^ractically  makes  such  rates  as 
the  business  requires  where  i:)Ooling  exists.     But  the 


*  Judge  T.  M.  Cooley,  Chairman  Interstate  Commerce  Commis- 
sion, Railway  Review,  January  8,  1887. 


AND  GOVERNMENT  CONTROL.  147 

pool  deprives  liim  of  the  ability  to  take  unfair  ad- 
vantage of  his  comijetitors.  Thus  their  suspicions 
and  jealousies  are  allayed  and  rate  wars  avoided.* 
Railways  are  constructed  to  make  money.  In 
order  to  make  money,  they  must  do  business.  In 
order  to  do  business,  they  must  meet  the  wants  of 
the  community;  must  harmonize  their  interests 
with  those  they  serve.  This  they  do.  This  natural 
sequence  of  events,  however,  is  only  understood  by 
the  few.  It  is  doubted  by  the  many.  These  last 
are  simply  ignorant.  They  view  with  suspicion 
everything  that  emanates  from  railroads,  their 
measures  and  policies — among  other  things  pooling. 
They  think  they  see  in  it  a  means  of  undue  ex- 
action, a  combination  to  oppress  the  public.  They 
therefore  favor  its  prohibition.  A  law  prohibiting 
water  from  seeking  its  level  would,  however,  be  just 
as  sensible,  just  as  effective.  Wherever  carriers  are 
prohibited  from  pooling,  they  will  find  a  substitute 
therefor,  or,  failing  in  this,  will  consolidate  their 
properties.  Rate  wars,  it  should  be  understood,  do 
not  arise  from  any  improper  motive,  are  not  dis- 
honest. They  are  the  outgrowth  of  instincts  inher- 
ent in  every  trader  —  acquisitiveness,  suspicion, 
craft;  a  desire  to  over-reach  his  competitor;  an  un- 
warranted belief  in  his  own  superior  resources. 
"  The  greatest  difficulty  encountered  in  the  attempt 
to  solve  the  railroad  problem  is  the  enforcement  of 
the  tariffs  after  they  have  been  mutually  agreed 
upon.     It  is  owing  to  the  spirit  of  competition  that 

*  Aldace  F.  Walker,  formerly  an  Interstate  Commerce  Commis- 
sioner, also  heartily  favors  pooling. 


148  BAILWAT  BATES. 

exists  between  railroads;  each  company  endeavoring 
to  secure  the  largest  amount  of  business,  to  increase 
its  tonnage  by  taking  the  business  from  some  other 
road."*  The  business  interests  of  a  country  require 
that  this  difficulty,  this  hindrance  to  its  healthy 
progress,  should  be  eliminated.  This  can  only  l)e 
accomplished  in  one  way,  that  is  by  combination, 
by  harmonious  action,  by  mutual  agreement,  by 
what  has  been  found  so  efficacious  in  other  countries 
— legalized  i^ooling.  Public  interest  and  policy 
require  that  this  should  be  done  in  the  United 
States,  not  at  some  indefinite  period  in  tbe  future, 
but  at  the  earliest  iiracticable  moment. 


*  Albert  Fink,  argument  before  Committee  of  Commerce,  Febru- 
ary, 1883. 


CHAPTER    VIII. 

RAILWAY  RATES  AND  GOVERNMENT  CONTROL — RATES 
MAY  BE  TOO  LOW,  TIIEY  CAN  NOT  BE  TOO  HIGH — 
RAILWAY  ENTERPRISE  —  UNNECESSARY  RAIL- 
ROADS: EFFECT  THEREOF  —  PROPER  SCOPE  OF 
GOVERNMENTAL  SUPERVISION. 

The  sudden  and  vast  growth  of  our  railway  sys- 
tem has  had  the  effect  to  bewilder  the  public  mind, 
to  prevent  its  problems  being  rightly  understood. 
The  subject,  in  all  its  details,  is  too  vast  to  be  com- 
prehended readily.  Time  is  required  for  the  acqui- 
sition of  this  knowledge  and  the  assimilation  of  the 
new  industry  with  surrounding  enterprises.  The 
liberal  commercial  spirit  that  animates  railways  has 
not  been  understood,  and,  because  of  this,  public 
sympathy  has  been  denied  them. 

The  baneful  effect  that  attends  warfare  on  private 
interests  is  generally  recognized,  but  because  of  the 
miignitude  of  railway  enterj^rise  and  its  impersonal 
character,  it  has  been  thought  to  be  an  exception, 
rendering  it  not  only  practicable  but  politic  to 
deny  its  owners  the  right  to  manage  their  property 
in  their  own  way,  but  to  hold  up  their  acts  to  j)ub- 
lic  reprobation.  The  sooner  this  impression  is  dis- 
sipated, the  better  it  will  be  for  the  country.  The 
sooner  the  people  learn  that  to  deprive  carriers  of 
any  x>ortion  of  their  just  earnings,  to  injure  their 

(140) 


150  RAILWAY  RATES 

credit  or  the  good  repute  of  tliose  who  own  or  man- 
age them,  is  to  injure  the  country,  the  better  it  will 
be  for  all  concerned. 

The  enormous  wealth  and  power  of  the  railway- 
companies  excite  apprehension  and  jealousy,  and 
the  subtleties  and  apparent  inconsistencies  that 
characterize  their  operations,  the  result  of  environ- 
ment, have  bred  a  disposition  to  surround  them  with 
hasty  and  ill-advised  acts  of  legislation.  The  rail- 
way system  of  the  United  States  is  inherently  and 
grossly  artificial,  and  the  efforts  of  owners  to  adjust 
their  affairs  to  these  conditions  and  the  necessities 
and  the  comities  of  business,  have  subjected  them  to 
many  unjust  charges.  These  accusations  have  their 
origin  in  ignorance,  and  will  continue  to  find  ex- 
pression so  long  as  the  conditions  that  engender 
them  exist  and  the  public  mind  remains  unin- 
formed. 

The  questions  of  public  interest  surrounding  the 
railway  system  are  too  great  to  be  fully  considered 
within  the  space  of  a  single  volume.  Only  the  more 
important  peculiarities  of  its  growth  and  operation 
can  be  noticed.  The  situation  in  the  United  States 
is  anomalous.  Nowhere  else  is  free  construction 
known.  Its  effect  has  not  been  what  was  expected. 
Its  benefits  far  outstrip  its  disadvantages.  How- 
ever, while  the  community  thought  that  the  multi- 
plication of  railways  under  all  circumstances  would 
prove  a  public  blessing,  their  construction,  under 
certain  conditions,  is  found  to  be  a  public  calamity; 
overproduction,  here  as  elsewhere,  entails  disaster 
proportionate  to  the  cause. 


AND  GOVERNMENT  CONTROL.  151 

Free  railway  construction  stimulates  the  ambition 
of  railroad  owners  and  managers  to  the  utmost.  It 
leads  them  to  build  and  operate  economically;  to 
construct  according  to  the  work  to  be  done,  and  to 
eagerly  adopt  every  device  that  will  imjDrove  the 
service,  or  lessen  its  cost. 

Some  of  the  mistakes  that  we  have  made  in  re- 
gard to  railroads  are  quite  apparent  to  us  now. 
We  know  that,  where  free  railway  construction  is 
permitted,  monoi)oly  is  impossible.  I  think  it  may 
also  be  assumed,  that  while  railroads  are  thought  to 
disregard  tlie  interests  of  the  community,  they  are 
exceptionally  sensitive  to  their  obligations  in  this 
direction;  that  wliile  legislatures  claim  the  right  to 
fix  rates,  the  anomalous  conditions  under  which  the 
railway  system  has  grown  up  and  its  chaotic  nature 
render  the  exercise  of  such  power  fraught  with  the 
greatest  danger  to  the  community;  that  while  it 
is  assumed  by  many  that  rates  may  be  fixed  arbi- 
trarily, they  are,  on  the  contrary,  the  result  of 
natural  causes. 

The  vast  territory  of  the  United  States  renders 
railroads  especially  valuable  in  its  development. 
Without  them  centuries  would  have  been  required 
to  accomplish  what  they  have  made  possible  in  a 
decade.  They  have  everywhere  vitalized  business, 
opened  new  and  productive  sources  of  supply,  built 
up  industries  that  would  not  have  been  possible 
under  other  conditions.  They  have  brought  the 
centers  of  commerce,  separated  by  vast  distances, 
into  active  and  continuous  competition,  and,  under 
their  benign  influence,  districts  remote  from  water- 


152  BAIL  WAY  HATES 

courses  enjoy  the  same  facilities,  and  in  many  cases 
the  same  prices,  that  the  most  favored  possess.  Tiiey 
have  made  tlie  impossibilities  of  yesterday  the 
possibilities  of  to-day.  Upon  their  beaten  tracks 
the  poorest  citizen  travels  in  greater  splendor  than 
the  monarch  of  olden  times.  Distance  is  no  longer 
an  element.  The  traveler  that  leaves  lis  at  dosk  to- 
day, after  the  lapse  of  twenty-four  hours,  we 
discover  pursuing  his  journey  a  thousand  miles 
away,  carefully  watched  over,  warmly  housed,  com- 
fortably fed,  serene,  and  happy.  Such  is  the  railway 
system.  It  affects  more  nearly  and  vitally  the  pros- 
perity and  comfort  of  a  community  than  any  other 
interest,  than  indeed  the  government  itself.  Suj^er- 
seding  other  forms  of  inland  conveyance,  it  deter- 
mines the  location  of  business  centers  and  vitalizes 
by  its  presence  or  blasts  by  its  absence.  Upon  the 
care  and  skill  exercised  in  maintaining  and  operat- 
ing it  depend  the  safety  and  comfort  of  those  who 
travel.  If  extravagantly  or  unwisely  managed,  the 
waste  is  lost  to  the  community.  If  injudicious 
economy  is  exercised,  the  same  community  suffers 
through  the  disasters  that  follow  or  the  lack  of 
necessary  and  X)roper  facilities.  In  order  to  com^^ass 
the  results  expected  of  them,  the  income  of  these 
gigantic  highways  should  be  sufficient  to  afford  the 
jDeculiar  labor  and  abundant  supplies  required  in 
their  operation  and  maintenance.  This  income 
should  also  be  sufficient  to  meet  the  interest  on  the 
cax)ital  expended  in  construction.  If  deficient  in 
either  respect,  the  community  suffers,  not  only  in 
the  common  conveniences  of  transportation,  but  in 


AND  GOVERNMENT  CONTROL.  153 

the  dei:)ressing  influence  that  capital  sunken  in 
unproductive  enterprises  entails  upon  surrounding 
industries. 

In  order  to  obtain  tlie  highest  possible  results, 
both  from  the  standpoint  of  the  community  and  the 
carrier,  railways  should  be  wisely  located. 

Only  such  lines  should  be  built  as  afford  reason- 
able proof  of  profitable  employment. 

It  is  an  industrial  axiom  that  a  man  who  causes 
two  blades  of  grass  to  grow  where  but  one  grew 
before  is  a  public  benefactor.  It  should  be  equally 
an  axiom  in  our  day  that  the  construction  of  two 
railways  where  one  suffices  is  a  public  misfortune. 
It  does  not  matter  that  the  inherent  vigor  of  a 
country,  abundance  of  cheap  land,  a  favorable 
climate,  and  attractive  x^oli^^h^al  institiitions  may 
enable  it  to  push  forwai-d  in  spite  of  these  condi- 
tions; they  are  none  the  less  unfortunate.  Such  a 
country  may  excite  our  admiration,  but  while 
admiring  Ave  can  not  forget  how  mucli  its  commer- 
cial greatness  might  have  been  enhanced  under  a 
more  beneficent  state  of  affairs. 

There  can  be  no  escape  from  the  general  proposi- 
tion that,  if  the  business  falling  to  the  lot  of  a  par- 
ticular railroad  is  only  sufficient  to  i^ay  its  legitimate 
expenses  and  interest,  the  construction  and  opera- 
tion of  an  additional  line  under  such  circumstances 
adds  to  the  financial  burden  of  a  country.  If  rates 
could  be  advanced,  at  will,  this  burden  might  be  dis- 
tributed. But  they  can  not.  The  effect,  moreover, 
is  to  restrict  the  general  usefulness  of  carriers, 
for  the  reason  that  no  rate  can  be  made  that  does 


154  BAIL  WAY  BATES 

not  at  least  pay  the  cost  of  operation  and  mainte- 
nance. Within  this  limit  such  rate  may  be  made  as 
the  conditions  of  business  require.  The  imi)ortance 
of  this  limitation  is  aj)ioarent,  when  we  remember 
that  the  profits  of  carriers  are  largely  dependent 
upon  the  amount  of  trafiic  handled;  that  a  diminution 
of  business,  by  dividing  it  between  two  or  more  roads, 
adds  to  the  cost  and  lessens  the  ability  of  the  car- 
rier to  handle  it.  Our  aim  should  be  to  build  up 
the  business  of  existing  roads,  to  wisely  locate  new 
ones;  to  i)revent  undue  multiplication  of  lines. 
Any  one  may,  however,  build  a  railroad  in  the 
United  States  who  can  raise  the  money.  "  Author- 
ity to  construct  comes  in  the  main  from  the  legisla- 
tion of  the  States  and  Territories;  and  if  we  examine 
these  w^e  shall  find  that  a^^parently  the  most  import- 
ant objects  in  the  minds  of  the  law-makers,  in  grant- 
ing charters  of  incorporation  for  railroads,  or  in 
j)assing  general  laws  which  shall  stand  in  the  place 
of  such  charters,  have  been  to  invite  and  secure  the 
construction;  to  invite  ca^^italists,  or  others  who 
can  secure  capital,  by  whatever  means,  for  the  pur- 
pose, to  expend  it  to  tliat  end;  and  that  with  this 
object  in  view  they  have  been  far  more  anxious  to 
make  their  legislation  satisfactory  to  the  promoters 
of  roads,  than  they  have  been  to  take  care  to  satisfy 
themselves  that  the  building  of  a  particular  road  is 
important  on  public  grounds,  or  that  the  road  when 
constructed  will,  in  the  service  it  will  perform,  meet 
a  public  demand."*    A  similar  state  of  affairs  does 

*  Judge  Thomas  M.  Cooley,  Chairman  Interstate  Commerce  Com- 
mission. 


AND  GOVERNMENT  CONTROL.  155 

not  exist  elsewhere.  Abroad  no  railway  can  be 
built  until  the  location  has  been  approved  by  the 
government,  and  this  apxiroval  is  only  given  after 
hearing  all  the  parties  in  interest.  In  England  the 
projectors  must  first  define  with  minute  precision 
the  location  and  character  of  the  proposed  line,  the 
necessities  that  exist  for  it,  and  the  encouragement 
that  it  has  received.  Afterwards  the  objections 
of  rival  lines,  communities,  and  individuals  are 
listened  to  and  considered.  The  result  of  these  mi- 
nute inquiries  is  to  determine  beforehand  whether 
the  x>roperty  is  likely  to  be  profitable  or  not,  or 
whether  there  exists  a  necessity  for  it.  The 
rights  of  individual  property  owners  are  thus  pro- 
tected from  unwarranted  seizure,  a  reasonable  and 
wise  precaution  is  taken  to  prevent  capital  from 
being  sunk  in  worthless  enterprises,  and  existing 
lines  are  protected  in  the  business  that  belongs  to 
them  and  that  is  necessary  to  their  wants.  That 
the  exercise  of  this  precaution  is  generally  wise  and 
beneficial,  no  reasonable  person  can  doubt.  For  a 
time,  no  injury  resulted  from  the  lack  of  proper 
supervision  and  restriction  in  the  United  States. 
The  first  lines  constructed  were  wisely  located  to 
meet  actual  and  ^prospective  needs,  and  a  reference 
to  them  upon  our  maps  shows  that  their  projectors 
anticipated  every  want  of  the  country  they  tra- 
versed. In  studying  the  location  of  these  great 
enterprises,  one  can  but  be  impressed  with  the  far- 
seeing  sagacity  and  wisdom  displayed.  If  the 
territory  thus  occupied  had  been  protected  from 
invasion  by  rival  companies,  its  traffic  to-day  would 


156  liAILWAY  RATES 

be  sufficient  to  afford  the  maximum  of  lianl  witli 
the  minimum  of  cost;  in  other  words,  the  public 
would  enjoy  the  low  rates  that  attend  an  abundant 
and  generally  j)rofitable  business.  This  is  assum- 
ing, however,  that  the  lines  would  have  been  man- 
aged as  efficiently  as  at  present.  But  this  is  at  least 
doubtful.  Rivalry  is  benelicial.  The  necessities  of 
competitive  companies  make  them  inventive,  alert, 
economical,  progressive,  anxious  to  please;  while, 
on  the  other  hand,  monopoly  induces  indifference, 
undue  conservatism. 

In  every  country  except  the  United  States,  rail- 
roads are  protected  in  their  territory.  But  they 
nowhere  afford  the  public  equal,  or  as  cheap,  accom- 
modation as  they  do  in  the  United  States.  This  seems 
to  i)i"ove  that  our  efficiency  in  some  measure  is  due 
to  the  rivalry  of  carriers,  and  the  responsibility  we 
have  put  upon  them.  What  else  can  it  be?  We 
are  not  smarter  than  others. 

If  railroads  could  Ije  allotted  a  given  territory 
without  lessening  their  inventiveness  and  enthu- 
siasm, their  desire  to  please;  if  we  could  combine 
the  advantages  of  monopoly  with  the  fruits  of 
competition,  the  acme  of  good  would  be  attained. 
It  is  possible  that  such  results  might  be  secured  if 
governments  would  abstain  from  meddling;  if  they 
would  leave  the  resi^onsibility  with  the  carrier — 
where  it  belongs;  if  they  would  stimulate  him  by 
criticisms  and  comparisons,  rather  than  handicap 
him  with  cumbersome  rules  and  regulations.  The 
experiment  has  never  been  tried. 

The   superior   advantages    offered  by  American 


AND  GOVERNMENT  CONTROL.  157 

railroads;  tlieir  cheapness,  the  low  rates  tliey  afford, 
are  undoubtedly  due  to  active  competition;  to  the 
fact  that  they  have  been  allowed  free  exercise  in 
every  direction.  The  moment  this  condition  of 
affairs  is  changed,  either  by  government  interference 
or  otherwise,  our  progress  will  be  less  rapid,  our 
facilities  less  amj^le,  our  charges  less  favorable. 
Responsibility  will  be  lost.  What  was  before  freely 
accorded  will  be  evaded  or  lessened. 

A  reason  of  the  s]3ecial  misfortunes  that  attend 
excessive  railroad  building  is  the  permanent  char- 
acter of  these  properties.  But  while  it  is  undoubt- 
edly true  that  railroads  can  not  be  moved  or  capital 
withdrawn  from  them  when  once  invested,  still,  if 
we  leave  the  owners  free  to  adjust  their  affairs  to 
conform  to  actual  conditions,  they  will  do  so  with 
the  least  possible  injury  to  the  community  and 
themselves.  The  profit  may  be  little  or  nothing 
for  awhile,  but  a  modicum  may  be  realized  over 
the  cost  of  operating.  But  this  will  be  dependent 
upon  natural  adjustment. 

The  cause  of  the  great  prosperity  of  the  United 
States  has  been  attributed  to  free  railway  con- 
struction.* This  is  not  wholly  true.  The  glamor 
of  our  institutions,  the  extent  and  boundless  fertility 
of  our  soil,  our  mineral  resources,  and  the  sturd\ 
and  enterprising  character  of  our  j)eople,  have  also 
had  much  to  do  with  this  prosperity.     But  all  these 


*  "  Many  reasons  .  .  .  have  been  given  as  tlie  cause  of  the 
prosperity  of  the  United  States,  but  the  real  cause  has  been  the  law 
allowing  free  railroad  construction." — E.  Bates  Dorsey,  Member  Am. 
Soc.  C.  E.,  in  Railway  Review. 


158  MAIL  WAT  RATES 

would  have  been  in  vain,  had  it  not  been  for  the 
boundless  capacity  of  those  who  own  and  operate 
our  railways;  had  it  not  been  for  the  ambition  that 
has  caused  them  to  build  largely  and  to  exercise 
their  talent  to  its  utmost  to  construct  and  operate 
effectively  and  cheaj^ly.  This  ambition  has  been 
the  result  largely  of  emulation,  of  competitive  inhu- 
ence.  To  these  we  owe  our  magnificent  railway 
system. 

We  have  pitted  the  owners  and  managers  of  rail- 
roads against  each  other  from  the  start;  have  placed 
them  on  their  mettle,  so  to  speak.  The  effect  has 
been  to  create  a  class  of  men  whose  business  and 
inventive  talent  amounts  to  genius. 

In  order  to  secure  minimum  rates,  carriers  must 
be  afforded  the  maximum  amount  of  business  and 
the  greatest  possible  latitude  of  operations.  The 
average  rate  charged  by  a  railroad,  taking  the  prop- 
erty as  a  whole,  ought  to  afford  an  income  equal  to 
the  cost  of  working  and  a  reasonable  return  on  the 
capital  invested.  This  is  the  most  favorable  condi- 
tion; the  most  happy  conjunction  of  circumstances. 
Wherever  properties  are  denied  this  income,  there 
is  a  shrinkage  in  the  value  of  their  securities,  occa- 
sioning loss  to  owners  and  sympathetic  depression 
elsewhere.  Unproductive  properties  are  also  apt  to 
lack  proper  facilities,  to  be  poorly  maintained,  to 
lack  the  conservative  instincts  and  responsibilities 
that  they  should  possess. 

While  more  or  less  distress  has  attended  the  con- 
struction of  railroads  in  advance  of  their  need  in 
the  United  States,  no  remedy  is  j)ossible  in  the  case 


AND  GOVERNMENT  CONTROL.  159 

of  existing  properties.  Moreover,  having  been  built 
under  natural  conditions,  so  far  as  the  government 
is  concerned,  like  conditions  should  generally  attend 
their  operation. 

Wherever  railroads  are  encouraged  in  advance  of 
the  wants  of  a  country,  the  community  must  suffer 
the  losses  resulting  therefrom,  until  such  time  as  the 
natural  growth  of  population  and  wealth  corrects 
the  evil.  But  while  a  government  can  not  cure  the 
evils  that  attend  too  many  railways  already  built,  it 
may,  by  x)reventing  the  construction  of  unnecessary 
roads  in  the  future,  prevent  further  injury.  There 
is,  however,  no  general  public  sentiment  or  instinct 
in  the  United  States  demanding  interference  of  this 
kind.  The  people  do  not  believe  that  in  permitting 
the  construction  of  two  or  more  lines,  where  one 
can  do  the  business,  they  have  thus  created  so  many 
more  mouths  to  feed;  that  they  increase  their  out- 
lay without  increasing  their  income.  Not  only  is 
there  no  general  opposition  to  the  construction  of 
new  and  unnecessary  lines,  but  the  reverse  of  this 
is  and  has  been  the  case.  Construction  is  every- 
where openly  encouraged,  and  credulous  citizens  are 
ever  found  to  buy  the  securities  of  such  enterprises. 
The  question  was  not,  "  Is  a  road  necessary  ?  Will  it 
pay?"  but,  "Can  the  money  be  raised  for  its  con- 
struction r '  In  order  to  secure  this,  cities  gave  free 
entrance;  railroads  were  aided  by  public  and  private 
subscrijDtions;  every  device  likely  to  aid  in  accom- 
plishing the  end  sought  was  resorted  to.  In  the 
temporary  benefits  that  attended  expenditures  for 
construction,    the    community    forgot    the    results 


160  RAILWAY  RATES 

likely  to  follow  when  expenditures  should  cease 
and  the  depression  that  follows  the  unwise  placing 
of  capital  should  begin. 

Several  causes  contribute  to  intensify  the  interest 
of  a  new  community  in  the  construction  of  railways. 
First,  the  enormous  enhancement  of  the  value  of 
land.  Second,  the  opening  up  of  a  market.  Third, 
the  competition  that  ensues.  Fourth,  the  money 
brought  into  the  community.  The  fact  that  a  road 
infringes  upon  the  right  of  an  existing  line  cuts  no 
figure.  The  possibility  of  having  two  mouths  to 
feed  instead  of  one  is  forgotten.  The  people  are 
everywhere  greedy  to  realize  present  advancement 
without  reference  to  future  contingencies.  In  the 
United  States  they  acted  more  wisely  than  they 
knew.  However,  they  were  not  entitled  to  any 
credit  for  it.  The  genius  of  others  rescued  them  from 
the  difficulties  of  the  situation.  The  skill  of  those 
who  owned  and  operated  both  the  old  and  the  new 
railroads  served  to  compensate,  in  a  measure,  for  the 
scarcity  of  business  that  the  undue  multiplication  of 
railways  engendered. 

Wherever  two  or  more  roads  occupy  the  same 
territory,  competition  is  active  and  more  or  less  ar- 
tificial. This,  coming  upon  the  heels  of  a  depleted 
business,  is  peculiarly  oppressive  to  the  carrier.  To 
save  himself,  he  has  recourse  to  every  device — com- 
bination, ingenuity,  economy.  Had  it  not  been  for 
the  skill  of  railway  managers,  the  policy  of  the 
United  States  would  have  forever  prevented  efficient 
management  or  low  rates.  The  people  sought  it  in 
the  multiplication  of  roads  without  reference  to  their 


AND  OOVERNMENT  CONTROL.  161 

necessity.  The  farther  they  traverse  this  course,  the 
more  mischievous  the  consequences  to  them,  unless, 
indeed,  it  is  attended  with  the  entire  freedom  of  the 
carrier,  with  his  right  to  do  vvliat  tlie  situation  re- 
quires, his  right  to  adapt  himself  to  circumstances, 
to  avail  himself  of  his  boundless  experience,  all  the 
devices  of  business  to  lessen  cost  and  increase  re- 
ceii)ts.  Undue  multiplication  of  railroads,  nnder 
other  circumstances,  can  not  but  be  fatal  to  a  coun- 
try. Competition  between  such  roads  can  not  be 
otherwise  than  injurious.  It  saps  the  foundation  of 
values  and  disturbs  everywhere  the  equilibrium  of 
*  trade.  It  may,  indeed,  seemingly  benefit  some  iso- 
lated community,  some  fragmentary  district,  but 
the  result  to  the  people,  as  a  whole,  will  be  deplor- 
able, and  the  temporary  advantages  of  particular 
sections  will  be  offset  by  general  harm. 

ISTo  prol)lem  of  commercial  or  financial  life  is  at 
the  present  time  of  more  vital  concern  to  the  com- 
munity than  that  involved  in  the  question  of  trans- 
portation. It  affects  everything  we  have;  it  deter- 
mines the  price  of  bread  stuffs,  the  cost  of  our 
wearing  apiDarel,  the  price  of  fuel,  the  cost  of  our 
houses — everything,  in  fact.  In  order  to  secure  fa- 
vorable rates  without  injury  to  the  carrier,  to  pro- 
cure the  necessities  of  life  at  the  minimum  cost, 
railroads  should  be  wisely  located  and  judiciously 
managed.  The  competition  of  traders  and  the 
rivalry  of  markets  will  do  the  rest. 

A  railway  is  a  fixture,  as  i)ermanent  as  a  water- 
course, as  the  eternal  seas  ;  but  differing  from  these 
in  this,  that  its  maintenance  involves  an  enormous 
11 


1G3  RAILWAY  RATES 

expense  that  never  ceases  for  a  moment,  day  or 
night.  Other  manufacturers  can  and  do,  when 
business  is  unprolitable,  discharge  their  operatives 
and  close  their  establishments  until  times  are  more 
projections  ;  announcements  of  this  description  follow 
each  other  in  quick  succession.  It  is  not  unusual  to 
read  that  the  closing  of  this  or  that  establishment  has 
thrown  five,  ten,  or  twenty  thousand  men  out  of 
employment.  This  heroic  remedy,  this  immediate 
adjustment  of  outlay  to  income,  is  imi)ossible  in  the 
case  of  railroads.  They  must  go  on  and  on,  and  in 
doing  so  can  make  little  diminution  in  their  outlay. 
To  this  extent,  therefore,  the  natural  law  based  on 
sujoply  and  demand  is  sensibly  modified  in  their 
case.  They  must  continue  to  j)roduce,  whether  there 
is  a  profitable  demand  for  their  product  or  not. 
Other  carriers  may,  when  competition  becomes  too 
active  or  business  is  unj^roductive,  seek  more  promis- 
ing fields  of  industry.  But  this  is  denied  to  rail- 
ways. If  there  is  a  healthy  demand  for  their  servi- 
ces, well  and  good  ;  if  not,  the  jDroperties  must  still 
be  maintained.  But  whenever  business  is  unprofit- 
able, expenses  are  curtailed  and  projDerties  run  down. 
Another  evil  is  engendered,  namely,  the  effect  on 
capital.  The  owners  of  such  property  are  no  longer 
able  to  fulfill  the  normal  conditions  of  life ;  their 
economies  engender  distress  in  other  directions,  and 
so  the  calamity  widens  until  it  becomes  universal. 
.  Where  the  location  of  railroads  is  determined  by 
the  government,  and  the  extent  and  number  of  such 
lines  is  restricted  to  the  actual  needs  of  the  country 
they  traverse,  the  government  may  sui)X)lement  its 


AND  GOVERNMENT  CONTROL.  163 

grants  by  supervision  and  restriction  more  or  less 
careful.  I  do  not  say  it  should.  A  line  having  thus 
an  exclusive  privilege  accorded  it,  while  not  a 
monopoly,  is  less  amenable  to  public  opinion  and 
interest  than  where  competition  is  more  active.  For 
railroads  thus  instituted,  the  government  may  fix 
the  limit  of  their  income,  according  to  the  measure 
of  cost.  Having  given  them  existence  and  sur- 
rounded them  with  exclusive  advantages,  the  duty 
of  seeing  that  these  benefits  are  not  abused  may 
follow  as  a  matter  of  course.  But  the  acts  of  the 
government  must  be  uniform  and  consistent,  must 
follow  each  other  in  due  sequence  from  the  start. 
It  is  not  proper  to  apply  to  railroads  built  under  the 
stimulant  of  artificial  devices  (without  reference  to 
their  productiveness  or  necessity),  obligations  that 
belong  to  semi- monopolies.  Where  a  community 
has  permitted  and  encouraged  the  construction  of 
unnecessary  railroads,  in  order  to  derive  an  indirect 
benefit  from  their  construction,  it  cannot  ex^Dect  to 
supplement  this  benefit  with  all  those  that  would 
attend  more  legitimate  enter j)rises. 

It  is  a  common  mistake  to  call  railroads  monopo- 
lies. It  is  a  misnomer.  It  is  esjpecially  so  in  the 
United  States.  Monopoly  implies  the  exercise  of  a 
privilege  denied  to  others,  the  possession  of  an  ex- 
clusive and  valuable  franchise  or  right.  No  such 
right  is,  as  a  matter  of -fact,  guaranteed  or  indeed 
exercised  by  railroads,  except  perhaps  in  isolated 
instances.  So  long  as  the  great  rivers,  lakes,  and 
seas  of  a  country  remain,  the  railroads  clearly  have 
not  unrestricted  control  of  transportation.     If  the 


1 G4  R^^TL  WA  Y  RA  TE8 

railroads  of  the  United  States  were  one  homogenous 
system,  under  the  control  of  one  management, 
owned  by  one  man,  tliey  would  still  not  be  a  mon- 
opoly. As  a  matter  of  fact,  they  are  divided  under 
many  managements  and  owned  by  many  men. 
Every  line  has  practically  been  i)aralleled.  The 
strife  for  business  is  incessant.  * 

Not  only  have  we  encouraged  the  construction  of 
railways  in  advance  of  their  need  in  new  and  unde- 
veloped regions,  but  wherever  a  line  existed,  and 
through  careful  management  and  the  growth  of  the 
country  had  built  up  a  X)roductive  business,  other 
companies  were  not  only  permitted,  but  encouraged, 
to  enter  tlie  territory  thus  occupied  and  strive  for 
a  share  of  the  traffic.  Companies  o^Derating  under 
these  conditions,  and  subject  to  invasions  of  this 
character,  are  the  farthest  possible  remove  from 
monopolies.  The  only  monopoly  they  j)ossess  is 
their  name,  and  this  is  practically  filched  from  them, 
in  many  instances,  by  the  ingenious  devices  of 
younger  and  rival  companies. 

An  ai3ple-stand  is  a  monopoly  up  to  the  point 
where  it  begins  to  pay.  To  this  extent  our  railways 
may  be  said  to  be  monopolies.  Up  to  the  point 
where  the  business  of  a  road  becomes  remunerative, 
or  is  fairly  established,  the  great  cost  of  undertak- 
ings of  this  character  affords  incidental  protection. 
The  right,  however,  up  to  this  j)eriod  is  valueless. 
But  at  the  point  where  business  becomes  fairly 
remunerative  and  might  be  of  value  to  the  com- 


*  There  is,  practically,  not  a  station  in  the  United  States  that  is  not 
affected  by  the  business  of  some  other  station  on  a  rival  line. 


AND  GOVERNMENT  CONTROL.  165 

munity,  at  the  point  where  a  steady,  uniform,  and 
constantly  increasing  reduction  of  rates  might  be 
exx3ected  to  follow,  a  new  line  is  permitted  to  invade 
the  territory  thus  occupied.  The  effect  is  to  divide 
the  traffic,  and  in  doing  so  destroy  hope  of  a  general 
or  uniform  reduction  in  rates,  based  on  a  plethora 
of  business,  until  such  time  as  the  growth  of  the 
country  Justifies  the  presence  of  the  second  line. 
But  at  this  period  it  is  probable  the  mistake  made  in 
the  first  instance  will  be  repeated.  And  thus  the 
multiplication  of  unnecessary  railroads  goes  on,  and 
the  community  is  deprived  of  opportunity  to  derive 
benefit  from  the  j)i'esence  in  its  midst  of  a  carrier 
whose  business  is  ample  for  his  supi)ort,  and  affords 
a  constantly  increasing  margin  of  profit,  which  he 
may  divide  with  the  j)eople  in  the  way  of  reduced 
rates  and  increased  facilities. 

If  a  field  affords  sufficient  income  for  two  or  more 
roads,  they  will  not  suffer,  because  of  the  dux)lica- 
tion,  but  the  community  will.  Under  the  most 
favorable  conditions,  railroads  are  only  allowed  a 
reasonable  return  on  the  capital  invested,  whether 
there  be  one  or  many  companies,  so  that  a  particu- 
lar line  is  not  necessarily  injured  by  the  construc- 
tion of  an  additional  road,  if  there  is  business  enough 
to  render  a  return  on  each.  The  loss  the  people 
suffer  is  the  increased  expense  of  operating  two  or 
more  enterprises  where  one  would  do;  also  the 
amount  of  interest  paid  on  the  cost  of  the  super- 
fluous property.  A  remedy  for  the  waste  is  in  the 
prevention  of  unnecessary  roads;  in  restricting 
them  to  actual  wants. 


1 G  6  RAIL  WA  Y  BA  TES 

The  object  to  be  sought  in  the  United  States,  at 
the  present  time,  is  the  j)revention  of  further  dupli- 
cation of  railroads  and  the  preservation  of  the  spirit 
of  rivalry,  of  conij)etition,  that  we  now  have  and 
that  has  been  engendered  by  free  construction  and 
un trammeled  operation. 

The  railways  of  the  United  States  in  their  location 
have  neither  method  nor  coherency.  Their  super- 
vision or  management,  as  a  whole,  is  altogether 
beyond  any  man,  or  corj3s  of  men. 

The  evils  that  attend  indiscriminate  construction 
find  amelioration,  if  not  absolute  cure,  with  the 
lapse  of  time  and  the  growth  of  a  country.  But 
having  once  secured  an  adequate  system,  no  new 
roads  should  be  ptermitted  without  permission  of 
the  government,  based  on  actual  needs.  The  grant- 
ing of  these  valuable  franchises  should  thereafter 
be  jealously  guarded.  Instead  of  permitting  the 
free  construction  of  railroads,  thereby  inviting  the 
building  of  lines  not  needed,  built  perhaps  for  the 
money  that  is  to  be  made  out  of  construction  or 
capitalization,  the  right  to  construct  should  not  be 
easily  obtained,  and  should  be  impossible  where 
conditions  do  not  warrant.  The  withholding  by  the 
government  of  the  right  to  build  a  railroad,  excejDt 
after  investigation,  while  it  would  not,  i^erhaps,  pre- 
vent, in  every  case,  the  construction  of  railroads 
that  ought  not  to  be  built,  would  give  to  existing 
railroads  likely  to  be  injured,  an  opportunity  to  be 
heard.  The  community  through  which  the  road 
proposed  to  i)ass  would  also  be  afforded  an  oppor- 
tunity to  express  itself.     Of  course  such  direction 


AND  GOVERNMENT  CONTROL.  16? 

and  control,  to  be  valuable,  should  be  exercised  with 
honesty  and  reasonable  intelligence.  No  body  of 
men  should  be  accorded  the  power,  if  they  have  the 
disposition,  to  grant  charters  under  corrupt  influ- 
ences, or  in  a  hidden  or  surreptitious  way,  or  without 
such  prolonged  and  j)ublic  notice  and  discussion  as 
would  serve  to  attract  the  attention  of  all  concerned. 

The  future  government  of  the  railroads  of  the 
United  States  should  conform  to  their  construction; 
to  the  methods  under  which  they  were  built;  to  the 
peculiar  conditions  that  surround  each  jiroiDerty. 
The  railway  system,  having  been  allowed  to  grow 
up  under  the  theory  that  the  community  derived 
its  quid  pro  quo  from  the  general  enhancement  of 
values,  added  facilities,  and  cheap  service,  must  be 
left  to  the  government  of  its  owners,  in  harmony 
with  its  environment  and  the  requirements  of  the 
several  x>roperties.  Having  permitted  and  encour- 
aged the  excessive  growth  of  railroads,  certain  hard- 
ships that  attend  thereon  can  not  now  be  avoided. 
But  they  may  be  modified  by  assisting  railroad 
owners  in  their  efforts,  through  pools  and  otherwise, 
to  adjust  the  load  to  be  borne. 

There  can  be  no  escape  from  the  proposition  that 
the  railway  system  must  be  placed  on  a  paying 
basis  before  a  country  of  which  it  forms  a  vital  part 
can  enjoy  general  or  prolonged  jDrosiDerity.  In  the 
accomplishment  of  this  end,  the  owners  of  such 
properties  should  take  the  lead.  The  nature  of 
the  business  requires  this  practical,  common-sense 
course.  The  government's  part  should  be  a  minor 
one.   The  railway  system  is  too  vast,  and  the  peculiar 


168  RAILWAY  BATES. 

circumstances  of  its  construction  and  operation 
involve  too  many  intricate  and  abstruse  questions, 
to  render  its  government  possible  excej^t  in  minut- 
est detail  and  with  special  reference  to  its  require- 
ments in  particular  cases.  Having  been  constructed 
with  a  view  to  its  oiDeration  in  detail,  it  can  not 
resx)ond,  except  disastrously,  to  any  general  or  fixed 
law  that  disregards  these  conditions. 

Free  railroad  construction  brings  in  its  train,  as 
has  been  shown,  advantages  unknown  to  monopolies. 
The  strife  engendered  by  rival  enterjorises  deepens 
and  broadens  the  intelligence  and  x^atriotic  instincts 
of  owners  and  operators.  This  last  is  apparent  in 
the  marked  disposition  of  the  railroads  of  the  United 
States  to  adapt  themselves  to  the  slightest  wish  of 
the  community.  It  is  discoverable  in  the  intro- 
duction by  them  of  new  appliances,  and  in  the 
betterment  of  those  already  in  use;  in  the  introduc- 
tion of  means  for  comfortable  and  even  luxurious 
travel;  in  the  construction  of  ornate  buildings,  of 
palatial  cars,  of  picturesque  roadbeds,  multij^lied 
trains,  and  ingenious  devices  to  avoid  irritating  or 
discommoding  the  p»ublic. 

Rivalry  between  railway  corporations  engenders 
better  service  and  heightened  intelligence.  But 
comx:)etition  between  them  for  a  common  traffic, 
based  on  undue  reduction  of  rates  and  multiplied 
expenses,  is  injurious.  Competition  that  arises  be- 
tween communities  and  countries,  based  on  their 
resx)ective  wants,  benefits  mankind;  that  between 
railroads  for  a  common  trade  does  not,  except 
within    carefully    prescribed    limits.     The    former 


AND  GOVERNMENT  CONTROL.  169 

is  governed  by  natural  laws  and  is  conservative  in 
its  action;  the  latter  is  largely  artificial  and  erratic. 
One  originates  in  the  wants  and  capacities  of  great 
multitudes  of  people;  the  other,  in  misrepresenta- 
tion and  jealousy.  One  benefits  mankind — is  the 
Creator's  method  of  adjustment;  the  other  serves 
only  to  disturb,  or  temporarily  benefit  a  petty  dis- 
trict, at  the  expense  of  the  general  good.  One  en- 
riches a  country;  the  other  impoverishes  it.  Under 
the  operation  of  one,  communities  far  apart  are 
made  to  contribute  to  the  common  good;  under  the 
other,  vahies  are  everywhere  undermined  to  secure 
an  unnatural  aim. 

Competition  between  raih'oads,  when  restricted  to 
actual  wants  and  carried  on  impersonally,  is  both 
proper  and  beneficial.  But  that  which  results  in 
doing  business  at  a  loss,  or  in  frittering  away 
natural  advantages,  is  neither  proper  nor  beneficial. 

Whenever  a  country  stimulates  the  construction  of 
railroads  by  gifts  of  valuable  franchises,  right  of  way, 
free  entrance  to  cities,  public  subscriptions,  private 
aid,  donations  of  land,  loaning  of  the  public  credit, 
and  other  devices,  it  must  not  afterward  complain  if 
the  consequences  have  not  been  altogether  foreseen. 
Acts  of  agrarian  legislation  and  foolish  manifesta- 
tions of  disappointment  and  hate  will  only  intensify 
the  situation.  Having  stimulated  the  construction 
of  railways  by  every  possible  device,  a  country  can 
not  afterward  refuse  them  its  protection.  Having 
invited  capitalists  to  invest  in  railroads  under  un- 
natural conditions,  it  can  not  justly  deprive  them  of 
their  property,  or  the  right  of  management. 


170  RAIL  WA  T  RA  TE8 

It  is  a  wise  maxim  in  law  that  a  man  can  not  take 
advantage  of  his  own  mistakes.  The  rule  applies 
with  equal  force  to  communities.  It  finds  applica- 
tion in  the  railway  problem.  Having  encouraged 
indiscriminate  railway  construction,  to  weaken  or 
destroy  the  property  afterward  by  restrictive  legis- 
lation is  unjust,  and  can  not  but  result  disastrously 
to  a  country  that  permits  it.  The  construction  of 
unnecessary  lines  was  encouraged  in  the  United 
States  because  of  the  real  or  supj)osed  benefit  the 
community  derived  therefrom  at  the  time,  without 
reference  to  the  effect  on  those  who  furnished  the 
capital.  The  community  is,  therefore,  estopped 
from  attempting  to  evade  its  share  of  responsibility. 
It  is  also  i)revented  from  exercising  a  restrictive 
influence  over  such  properties,  inconsistent  with  the 
conditions  under  which  they  grew  up.  Having 
encouraged  and  fostered  a  system  based  on  the 
hypothesis  that  under  it  rates  should  be  left  to  the 
comi:>etitive  forces  of  trade,  it  can  not  afterward  come 
forward  and  presume  to  treat  them  as  monopolies. 

The  immediate  advantages  a  community  derives 
from  the  construction  of  a  railway  are  numerous. 
It  is  benefited  by  the  enhancement  of  local  values, 
the  introduction  of  new  capital,  and  frequently  by 
reductions  of  rates.  But  the  loss  it  suffers  from  the 
construction  of  unnecessary  roads,  like  the  losses 
that  follow  over-production  in  other  directions,  are 
so  complicated  that  they  are  not  traced  to  their  real 
source.  But  in  the  exact  proportion  that  railways 
are  built  in  advance  of  their  wants,  in  that  propor- 
tion will  the  community  be  injured  ;  depression  will 


AND  GOVERNMENT  CONTROL.  171 

follow  to  just  the  extent  construction  is  unwar- 
ranted. 

Free  construction  of  railways  should  be  carried 
on  under  the  same  conditions  that  other  business 
enterprises  are.  Whatever  a  company  needs,  it 
should  pay  for,  to  the  utmost  limit  of  bargain  and 
sale.  If  it  is  allowed  to  occupy  or  cross  a  street,  or 
piece  of  x^ublic  or  private  ground,  it  should  pay  the 
same  price  for  such  x)rivilege  that  a  manufacturing 
establishment  would  for  a  corresj^ondiug  amount  of 
property  of  equal  value.  It  should  pay  the  full 
value  of  its  right  of  way,  and  no  benefits,  rights, 
privileges,  immunities,  grants,  or  assistance  should 
be  extended  to  it  that  are  not  extended  to  private 
parties.  Under  such  conditions,  free  railway  build- 
ing would  be  measurably  deprived  of  objectionable 
features,  for  the  reason  that  the  cost  of  construction 
would  be  just  so  much  greater,  and  in  so  far  as  it 
was  greater,  to  that  extent  unnecessary  properties 
would  not  be  built,  and  those  already  in  existence 
would  be  protected.  But  a  railroad  built  under  such 
conditions  would,  it  is  manifest,  be  entitled  to  the 
same  Immunities  and  privileges  enjoyed  by  other 
manufacturers.  The  authority  of  the  government 
could  not  extend  beyond  the  supervision  necessary 
to  the  protection  of  its  citizens.  Comi)etition  under 
such  Conditions  would  be  conservative,  because  it 
would  arise  more  from  natural  causes. 

If  we  could  conceive  of  such  a  thing  as  a  railway 
monopoly,  we  might,  it  is  jDrobable,  devise  a  system 
for  formulating  its  tariffs,  or  we  might  conceive  that 
it  would  be  possible  for  an  intelligent  and  experi- 


172  RAILWAY  RATES 

enced  commission  to  do  so.  But  where  railroads 
have  been  built  without  reference  to  the  rights  or 
necessities  of  existing  lines,  and  have  been  allowed 
to  parallel,  cross,  and  recross  each  other,  at  pleasure, 
forming  a  conglomerate  mass  impossible  to  follow 
or  understand,  except  in  minutest  detail,  any 
attempt  to  formulate  a  law  governing  such  a  sys- 
tem, or  to  require  a  board  of  commission  to  exercise 
such  a  j)ower  (excejot  in  an  extremely  limited  and 
conservative  sense),  can  not  but  result  disastrously. 
The  question  is  asked  again  and  again,  how  far 
does  the  law  of  political  economy  apply  to  railroads  ? 
How  far  does  the  law  of  supply  and  demand  govern  ? 
In  tlie  end,  absolutely.  But  for  the  moment  it  may 
be  modified,  to  the  extent  that  railroads  are  built 
in  advance  of  their  needs,  because  of  donations  of 
money,  lands,  credits,  rights,  privileges,  immuni- 
ties, franchises,  or  otherwise.*  The  rule  that  a  thing 
will  not  be  created  until  it  is  needed,  or  beyond 
its  need,  does  not  apply  in  such  cases.  Wherever 
artificial  stimulants  are  applied,  artificial  enter- 
l^rises  will  grow  up.  It  is  to  the  aid  extended  that 
we  owe  largely  over-production  in  railroads. 
Wherever  special  inducements  are  held  out,  they 
are  certain  to  encourage  enterprises  in  advance  of 
their  needs.  And  in  so  far  as  this  is  the  case,  the 
law  of  trade,  that  the  supply  of  a  thing  will  be 
based  on  the  demand,  is  modified.  The  abeyance 
is   only   momentary,   however.     Railroads   quickly 


*  Under  the  last-named  head  I  embrace  the  use  of  surplus  reve- 
nue of  one  line  to  build  lines  that  would  not  otherwise  be  con- 
structed. 


AND  GOVERNMENT  CONTROL.  173 

adjust  themselves  to  normal  conditions,  and,  there- 
after, are  governed  by  its  laws. 

Over-x:»roduction  in  railroads  engenders  over-pro- 
duction in  other  directions.  It  superinduces  specu- 
lation— the  frittering  away  of  needed  reserves. 
Wherever  free  construction  is  permitted,  bounties 
should  be  prohibited.  Those  who  build  railways 
should  be  compelled  to  pay  for  the  property  they 
use.  Thus  capital  will  not  be  lured  into  unprofit- 
able and  unnecessary  ventures. 

It  is  hardly  probable  that  the  free  construction  of 
railways  will  ever  be  forbidden  in  the  United  States. 
We  may,  therefore,  expect  to  see  sudden  and  wide 
fluctuations  of  prices,  wherever  the  law  of  supi)ly 
and  demand  is  transgressed — seasons  of  great  j)ros- 
lierity  and  wild  speculation,  followed  by  periods  of 
depression.  While  undue  duplication  of  railways 
can  not  but  be  attended  with  more  or  less  hardship), 
nevertheless  I  think  that  if  freedom  to  construct  is 
attended  with  freedom  to  operate,  with  freedom  to 
the  owner  to  adapt  himself  to  his  environment,  the 
danger  will  not  be  great.  The  building  of  unneces- 
sary roads  is  not  nearly  so  injurious,  not  fraught 
with  nearly  so  much  danger,  as  taking  the  responsi- 
bility and  control  of  railroads  out  of  the  hands  of 
their  owners  and  vesting  it  in  the  government.  Not 
that  I  question  the  value  of  government  supervision, 
if  wisely  exercised.  But  it  should  be  merely  super- 
visory; should  not  enter  into  the  practical  details  of 
business,  such  as  the  making  of  rates,  the  running  of 
trains,  and  kindred  matters.  Under  these  restric- 
tions it  tends  to  allay  public  irritation  and  suspicion, 
and  is,  consequently,  a  valuable  auxiliary. 


174  RAILWAY  RATES 

Over-j^roduction,  with  its  attendant  hardships,  is 
accompanied  nnder  all  forms  of  popular  government, 
by  the  growth  of  communistic  ideas  and  the  enact- 
ment of  agrarian  laws.  Where  the  ignorant  and  the 
enlightened,  the  educated  and  the  uneducated,  the 
self-reliant  and  the  dependent,  the  good  and  the  bad, 
the  amiable  and  the  vicious,  the  rich  and  the  poor, 
have  a  common  voice  in  governing,  the  rabble  will 
avail  itself  of  every  excuse  to  pass  laws  that  would, 
under  other  circumstances,  be  called  robberies.  The 
railway  interest  especially  invites  the  attention  of 
this  class.  Being  at  once  the  greatest  and  the 
least  understood,  and  apparently  that  with  which 
the  people  have  the  least  in  common,  it  is  the  first 
to  be  singled  out  for  attack.  However,  other 
industries  are  attacked  in  their  turn.  Robbers  do 
not  respect  persons.  They  may  set  out  determined 
to  mulct  only  the  rich,  but  they  soon  cease  to  dis- 
criminate, robbing  all  alike.  So  it  is  with  the  agra- 
rian classes.  They  may  set  out  to  rob  railroads 
only,  but  it  will  not  be  long  before  the  newsp>aper, 
banker,  merchant,  and  manufacturer  will  be  called 
upon  to  share  their  fate.  It  will  not  then  avail  to 
say  to  tills  class  that  such  laws  are  p)ernicious,  that 
they  react  upon  those  who  make  them.  Those  who 
seek  relief  in  enforced  levies  of  this  kind,  do  so 
under  a  belief  that  by  a  master-stroke,  values  may 
be  transferred  from  one  class  of  the  community  to 
another,  without  subsequent  embarrassment  to  the 
parties  securing  them.  They  are  intent  upon  ac- 
quiring something  for  nothing,  and  in  the  vicious 
struggle,   regard  neither  principles  nor    methods. 


AND  GOTERmrENT  CONTROL.  175 

They  overwhelm  all  in  common  rnin.  Snch  agita- 
tion is  characterized  as  commnnism  in  France;  in 
America  it  is  called  the  i)rotection  of  the  masses 
against  the  exactions  of  grasping  monox^olies.  It  is 
based  on  the  theory  that  2:tarts  of  a  commnnity  may 
have  interests  ^permanently  distinct  from  other 
parts,  or  from  the  country  as  a  whole.  That  the 
provident  may,  by  legislative  enactment,  be  made  to 
labor  for  the  benefit  of  the  improvident. 

Wherever  hardship  is  entailed  by  over-produc- 
tion, whether  of  railroads  or  wheat,  we  see  it  re- 
flected, according  to  the  intelligence  and  character  of 
a  people,  in  their  newspapers  and  public  assemblies. 
In  Paris  it  manifests  itself  in  a  cry  for  the  over- 
throw of  the  government ;  in  the  United  States  for 
railway  regulation ;  for  a  reduction  of  rates.  The 
latter  offers,  api^arently,  an  easy  oi:)portunity  to 
escax)e  some  portion  of  the  shrinkage  in  x^rices,  be  it 
of  coal  or  grain.  It  has,  moreover,  the  merit  of  not 
offending  any  large  portion  of  the  community.  It 
is  not  a  matter,  seemingly,  in  which  the  latter  is 
interested,  except  in  a  vague  way.  However,  reduc- 
tion in  the  rates  of  railroads,  beyond  the  point  neces- 
sary to  enable  them  to  meet  their  obligations  and 
render  a  return  on  the  original  investment,  injures 
them,  and  through  them  the  community.  It  is  from 
this  standpoint  that  the  country  must  consider  the 
question. 

The  magnitude  and  peculiar  nature  of  railway 
property,  and  the  necessity  of  its  being  operated  at 
all  times  and  under  all  conditions  of  business,  ren- 
der it  impossible,  as  I  have  pointed  out  elsewhere, 


176  RAILWAY  RATES 

to  effect  any  great  or  sudden  saving  in  exjienses. 
Such  savings  are  possible  through  diminution  of 
force,  and  the  introduction  of  improved  appliances 
and  better  organization.  But  this  requires  time.  It  is 
im  j)ossible  that  any  instantaneous  or  effective  measure 
should  be  carried  out  upon  the  spur  of  the  moment 
to  meet  reductions  in  rates.  Hence  the  hardship 
that  attends  such  measures.  Business  depression  or 
shrinkage  in  values,  no  matter  how  slight,  reflects 
itself  in  the  affairs  of  carriers.  If  trade  is  depressed, 
it  affects  their  traffic.  They  could  not,  if  they 
v^ould,  avoid  the  calamities  that  overtake  those 
about  them.  It  manifests  itself  in  lessened  number 
of  i^assengers  and  in  the  falling  off  of  tonnage,  in  loss 
of  revenue.  Frequently  the  depression  of  the  carrier 
precedes  that  of  the  community  ;  in  some  cases  it  is 
co-existent ;  sometimes  it  follows,  but  it  exists  in 
every  instance  in  exact  proportion  to  that  of  the  com- 
munity, and  by  no  adroitness  or  subterfuge  can  it  be 
evaded.  It  makes  but  little  difference  to  the  car- 
rier, in  operating  and  maintaining  his  property, 
whether  times  are  jirosperous  or  otherwise;  his  road- 
bed and  equipment,  with  all  their  appliances,  must 
be  kept  up  to  the  maximum  standard  ;  taxes  must 
be  paid ;  men  familiar  with  the  geography  of  the 
road  and  the  details  of  its  traffic,  and  acquainted 
with  the  niinutise  of  its  business  and  schooled  in  the 
operation  of  its  trains,  station  and  yard  work,  must 
be  employed  whether  rates  are  high  or  low,  whether 
business  is  i)roductive  or  unproductive.  It  does  not 
require  a  man  experienced  in  railway  affairs  to 
understand  these  truths.    They  are  self-evident.    If 


AND  GOVERNMENT  CONTROL.  177 

carriers,  tlieu,  must  share  in  the  hardships  of  their 
neighbors  when  times  are  bad,  ought  they  not  equally 
to  be  allowed  to  share  in  their  prosx)erity  when 
times  are  propitious  ? 

The  world  occupies  common  ground,  and  the  in- 
terests of  men  are  never  divergent.  The  disasters 
and  hardships  of  mankind  react  upon  each  other. 
The  millionaire  and  the  laborer  suffer  proj)ortion- 
ately.  Every  business  disaster  that  occurs  affects 
(according  to  its  extent),  every  other  industry;  it 
may,  indeed,  not  be  pei^ceptible  to  every  one,  but  it 
exists,  nevertheless;  all  classes,  from  the  richest  to 
the  poorest,  must  bear  their  j)i'opoi'tion  of  the 
burden.  In  the  case  of  labor,  the  loss  may  not 
reflect  itself  in  a  reduction  of  the  rate  of  wages,  but 
may  find  expression  in  the  j)urchasing  power  of 
such  wages,  or  in  enforced  idleness.  The  result  is 
always  the  same.  If  one  interest  is  affected  by 
extraordinary  causes,  all  otlier  interests  will  be 
affected  in  like  manner,  in  the  x^roportion  that  each 
*bears  to  the  other.  Whenever  an  industry  derives 
unfair  advantage  from  the  misfortunes  of  another, 
in  so  far  as  it  does  so  at  one  time,  it  will  react 
correspondingly  at  another  time.  There  can  be  no 
escape  from  this  law  of  natural  adjustment.  "As 
ye  sow,  so  shall  ye  reap."  Such  is  God's  fiat,  and 
it  ai^plies  as  strongly  to  the  commercial  and  financial 
affairs  of  nations  as  it  does  to  men. 

The  interests  of  a  country  do  not  lie  in  enforced 
reduction  of  rates  of  carriers,  where  sharp  com- 
petition exists,  but  in  strengthening  their  hands  in 

their  efforts  to  maintain  them.     I  do  not  maintain 
12 


178  RAILWAY  BATES 

that  every  railroad  can  be  made  productive,  or  that 
it  should  be.  The  general  law  of  adjustment  ap- 
plies to  them,  the  same  as  to  other  manufacturers. 
But  they  should  not  be  crippled  by  extraneous 
action.  They  should  be  left  unhampered  to  work 
out  their  destiny,  the  same  as  other  business  enter- 
I)rises. 

Generally  sxDeaking,  the  productiveness  of  rail- 
roads should  be  uniform  and  steady,  and  their 
prosx)erity  should  afford  the  community  the  same 
gratification  that  the  prosperity  of  agricultural, 
manufacturing,  or  mining  industries  affords  them;  a 
pros]Derity  it  particix3ates  in. 

Under  normal  conditions,  rates  adjust  themselves 
naturally  and  according  to  fixed  i)rincii)les.  But 
with  undue  multiplication  of  facilities  and  other 
artificial  i^rocesses,  abnormal  conditions  intervene; 
strife  usurps  the  place  of  order,  intrigue  of  frank- 
ness; equivocation  becomes  an  art;  cunning  takes 
the  ]3lace  of  ability;  the  fundamental  maxim  in 
commercial  life — that  you  shall  do  as  you  agree — is 
not  always  regarded,  and  honest  practice  and  truthful 
statement,  and  the  faithful  execution  of  contracts 
and  agreements,  become  i)roblematical.  Such  are 
the  fruits  of  artificial  competition,  if  not  practically 
regulated  and  controlled.  Every  one  is  interested 
in  seeing  that  it  is  so  regulated  and  controlled  in 
the  case  of  railroads.  It  can  only  be  brought  about 
by  ui)holding  the  hands  of  owners  and  managers. 
Up  to  this  time,  the  most  efficacious  means  found 
for  accomplishing  this  result  is  pooling,  or,  failing 
that,  consolidation. 


AJm  GOVERNMENT  CONTROL.  179 

In  railway  administration,  the  strong  com]3anies 
protect  and  foster  the  weak;  to  break  tliem  down 
woukl  be  to  entail  liardships  imj)ossible  to  calcnlate 
in  advance.  Bankrupt  j)roperties  are  not  governed 
by  the  conservative  instincts  of  business  men,  or  the 
equities  of  commercial  affairs.  Irresponsible  and 
lawless  action  takes  the  place  of  order  and  concerted 
method  in  their  affairs,  and  thus  the  productiveness 
of  surrounding  pro^^erties  is  weakened,  if  not 
destroyed.  The  conditions  are  the  same  with  rail- 
roads as  with  merchants  or  manufacturers;  a 
merchant  or  manufacturer  can  not  exi:)ect  to  receive 
the  maximum  profit  from  his  business,  if  other 
merchants  or  manufacturers  are  doing  an  unprofit- 
able business.  The  unfortunate  enterprises  destroy 
the  calculations  of  those  more  fortunate.  The  same 
rule  ai)plies  to  railroads;  the  average  condition  must 
be  good.  Therefore,  wherever  a  weak  iDroperty 
exists  in  competitive  enterprise,  we  find  the  strong 
desirous  of  aiding  it;  willing  to  pool  their  revenues 
in  order  to  secure  peace  and  order.  And  in  so  far 
as  they  are  willing  to  do  this,  their  efforts  should  be 
encouraged,  not  thwarted.  Every  agreement  of  this 
kind  should,  after  judicious  investigation,  if  found 
equitable,  receive  the  apx)roval  and  support  of  the 
government.  It  is  only  in  this  way  that  warfare 
between  lines  competing  for  a  common  business  can 
be  controlled.     It  can  never  be  wholly  prevented. 

In  legislating  for  railways,  their  peculiarities  and 
differences  must  be  remembered.  No  rule  or  pro- 
cedure can  prove  satisfactory  that  seeks  to  make 
rates  for  them,  as  a  whole,  or  that  binds  them  to 


180  RAILWAY  RATES 

uniform  methods  of  business.  Conditions  preclude 
this.  As  soon  might  we  attempt  to  maintain  the 
standard  of  a  nation  by  giving  to  each  j)erson  a 
given  quantity  of  food,  air,  water,  physical  exer- 
cise, mental  labor.  Men  require  nourishment  ac- 
cording to  their  capacity.  The  commerce  of  a  coun- 
try and  its  system  of  transportation  is  but  a  reflex 
of  man' s  characteristics  in  this  respect. 

The  duty  of  determining  the  rates  of  a  railroad  is 
an  exceedingly  complicated  and  delicate  task;  one 
requiring  extended  knowledge  and  study.  It  can 
not  be  determined  abstractly,  or  in  advance  of  the 
wants  of  business,  but  must  be  adjusted  from  day  to 
day  to  conform  to  its  fluctuations.  The  force  thus 
engaged  is  very  large.  Its  duty  is  to  aid  in  x^ushing 
business  forward;  to  make  it  j)ossible  and  profitable. 
It  is  made  up  of  exjDerienced  and  talented  men,  fa- 
miliar with  the  commerce  of  the  country,  and  edu- 
cated to  respond  to  its  requirements.  Such  a  body 
of  men  is  not  to  be  found  in  a  rotative  service. 
They  are  bred,  reared,  and  educated  slowly  and 
laboriously,  little  by  little.  Each  day  adds  some- 
thing to  their  knowledge,  to  their  usefulness.  Such 
a  body  has  been  slowly  growing  uj)  in  the  railway 
service  since  the  first  railway  was  constructed.  The 
skill  of  its  members  is  still  far  from  being  per- 
fect, but  the  i)rogress  they  have  made  is  as  great  as 
could  be  exx)ected.  It  must  be  remembered,  that 
they  were  called  uj)on  to  meet  new  conditions,  inter- 
ests, prejudices,  and  passions;  a  work  that  no  simi- 
lar body  of  men  in  the  world  had  ever  been  called 
uj)on  to  deal  with  before.     These  facts  should  be 


AND  GOVERNMENT  CONTROL.  181 

remembered  in  judging  tliem,  and  in  estimating  tlie 
danger  that  will  attend  a  transfer  of  their  duties  to 
others. 

While  everyone  familiar  with  the  working  of  rail- 
roads can  not  but  doubt  the  advisability  of  govern- 
mental interference  with  their  rates,  they  will  hail 
with  j)leasure  such  reasonable  and  proper  sux^ervis- 
ion  of  their  affairs  as  may  be  necessary  to  satisfy 
the  x^ublic  of  their  equitable  working,  or  that  may 
be  necessary  to  secure  the  jnst  accountability  of  own- 
ers and  managers  ;  that  will  secure  due  and  equitable 
capitalization,  and  economical  and  faithful  manage- 
ment. Bona  fide  disbursements  should  be  the  limit 
of  caiDitalization,  and  similar  expenditure  the  meas- 
ure of  operations.  Here  is  a  field  for  the  govern- 
ment, at  once  broad  and  useful. 

In  railway  operations,  capitalization  should  go 
hand  in  hand  with  exj)enditure,  but  should  not  in 
any  case  i^recede  it.  To  offer  a  bonus  for  the  con- 
struction or  capitalization  of  a  railroad,  should  be  a 
legal  impossibility — an  unlawful  act.  Supervision 
of  this  kind  comes  within  the  natural  and  legitimate 
province  of  governments.  But  it  is  less  likely  to 
receive  attention  than  other  matters  not  so  bene- 
ficial, but  about  which  i^ublic  agitation  and  misrepre- 
sentation clamor.  We  shall  ever  see  less  disposition 
to  restrict  the  number  of  railroads  to  actual  needs 
than  to  control  their  rates  ;  less  disiDOsition  to  pre- 
vent undue  capitalization  than  to  award  sufficient 
income  afterwards  ;  less  disposition  to  attend  to  the 
modest  and  j)ractical  duties  of  government  than  to 
attain  the  impossible. 


1 82  RAIL  WA  Y  RATES 

The  advisability  of  governmental  supervision  is 
generally  recognized.  It  is  indisx^ensable  to  a  cor- 
rect understanding  between  the  railroads  and  the 
l)eople.  It  is  valuable  in  cases  of  dispute,  and  facili- 
tates a  better  understanding  of  the  railway  problem 
ui^on  the  part  of  th.e  people  ;  as  a  means  of  dissemi- 
nating trustworthy  information  ;  as  a  means  of  cor- 
recting popular  mistakes  in  regard  to  such  prop- 
erties. In  this  field  its  value  can  not  be  overesti- 
mated. The  j)ublic  believes  the  statements  of  its 
agents  ;  it  looks  with  suspicion  upon  those  made 
by  the  owners  and  managers  of  railroads.  Public 
supervision  affords,  therefore,  an  invaluable  means 
of  intercommunication.  The  railways  desire  only 
that  the  truth  shall  be  told  of  them.  They  have 
nothing  to  conceal. 

An  impartial  and  responsible  commission  of  gov- 
ernment officers  is  thus  valuable  to  the  railroad 
comxDanies,  as  well  as  to  the  jpublic.  But  it  is  essen- 
tial that  it  should  be  impartial,  and  that  its  duties 
and  resiDonsibilities  should  be  confined  within  i)rac- 
tical  limits.  It  should  not  be  a  creative  body. 
While  possessing  the  right  to  inquire  into  all  mat- 
ters of  public  concern,  its  inquiries  should  be  con- 
ducted in  a  spirit  of  fairness  and  with  reference  to 
the  interests  of  the  people  as  a  whole,  and  not  of  a 
class  or  section.  The  relations  between  carriers  and 
the  people  are  always  strained.  Differences  con- 
tinually arise  between  them,  and  acts  upon  the  ptart 
of  carriers,  that  arise  from  natural  and  unavoidable 
causes,  are  often  ascribed  to  sinister  purposes.  The 
public  are  both  curious  and  uneasy.     Their  dispo- 


AND  GOVERNMENT  CONTROL.  183 

sition  to  criticise  does  not  arise  from  malevolence, 
but  from  want  of  proper  understanding  of  the  sub- 
ject—from Jealousy  and  fear,  born  of  misai)pre- 
hension.  This  is  not  strange.  The  magnitude  and 
power  of  a  railroad  are  so  great  that  the  individual 
voice  seems  powerless  to  make  itself  heard.  Such 
is  the  public  belief,  however  mistaken.  An  impar- 
tial tribunal  has  it  in  its  power  to  correct  all  this. 
It  is,  therefore,  at  once  a  social  and  commercial 
necessity. 

The  imaginary  evils  of  mankind  are  quite  as  hard 
to  bear  as  those  that  really  exist.  The  great  bulk 
of  the  grievances  of  the  j)ublic  against  railways  are 
wholly  imaginary,  but  none  the  less  real  on  that 
account.  For  that  reason,  it  is  of  the  greatest 
imi)ortance  that  they  should  be  cleared  away;  that 
the  disposition  of  the  j)eo23le  to  attach  real  effects  to 
imaginary  causes,  to  distort  petty  grievances  into 
great  public  calamities,  to  se^^arate  the  interests  of 
one  class  from  another,  to  foster  agrarian  laws, 
should  cease.  This  may  all  be  brought  about  by 
officials  of  the  government  acting  without  prejudice. 

The  prime  duty  of  the  government,  in  regard  to 
railroads,  is  to  see  that  the  laws  are  not  violated,  to 
inquire  into  complaints  regarding  excessive  rates, 
unjust  discrimination,  lack  of  adequate  facilities — 
to  be  a  conservator,  in  fact,  in  the  general  interest; 
not  having  power  to  create  conditions,  but  to  ame- 
liorate by  investigation  and  suggestion;  not  having 
the  power  to  relieve  the  owners  and  operatives  of 
railways  of  responsibility  to  the  public  for  the 
safety  and  convenience  of  travel  and  the  necessities 


184  li-^IL  WA  T  RA  TES 

of  business,  but  the  right  to  investigate  comx)Uiints 
and  pass  judgment  thereon. 

Too  great  care  can  not  be  exercised  in  giving  ex- 
traneous bodies  authority  over  railway  property. 
Nothing  shoukl  be  allowed  to  come  between  the 
owner  and  the  j)ublic.  This  association  of  interest 
and  identity  is  necessary  to  the  j)ublic  good.  No 
one  can  supply  the  owner's  place.  He  should  not 
be  allowed  to  hide  himself  behind  a  commission. 
He  should  be  directly  amenable  to  j)ttblic  opinion 
for  the  manner  in  which  he  carries  on  his  business. 
He  is  abnormally  sensitive  in  this  respect;  more  so 
than  the  officials  of  the  government.  The  latter 
habitually  shield  themselves  beliind  customs  and 
formalities  to  which  they  ascribe  the  force  of  prin- 
ciples and  necessities.  They  envelop  themselves  in 
their  prerogative,  as  in  a  shell,  in  which  they  are  as 
inaccessible  to  attack  or  criticism  as  if  denizens  of 
another  world.  It  is  the  same  in  every  country. 
As  tlie  rei)resentatives  of  the  people,  its  agents 
and  protectors,  they  are  the  creatures  of  form,  the 
apostles  of  precedence,  the  slaves  of  precedent. 
Their  safety,  convenience,  dignity,  interest,  and 
j)rejudice  are  the  measure  of  their  duty.  Theirs  is 
not  a  divided  allegiance.  They  look  at  the  country, 
as  a  whole;  never  to  the  individual.  The  latter  is 
their  natural  enemy.  They  shield  themselves  be- 
hind impersonal  laws.  The  delay  of  business,  the 
convenience  of  the  jDeople,  is  as  if  it  were  not. 

Railways  lose  half  their  usefulness  when  man- 
aged by  public  servants.  The  value  of  such  prop- 
erty is  so  largely  dependent  u^jon  the  estimation  in 


AND  GOVERNMENT  CONTROL.  185 

which  it  is  hekl  by  the  people,  tliat  x>i'ivate  owners 
are  conii:)elled  to  listen  attentively  to  every  com- 
plaint, be  it  reasonable  or  not,  and  to  act  promptly 
in  providing  a  remedy.  Tlie  government  is  not,  for 
these  reasons,  a  fit  substitute.  It  is  too  impersonal. 
But  a  commission  before  which  individuals  may  lay 
their  complaints;  a  board  whose  duty  it  shall  be  to 
explain  the  principles  of  transportation,  however 
individual  interests  may  be  affected;  a  board  whose 
duty  it  shall  be  to  consult  with  owners  and  opera- 
tives of  railroads  in  regard  to  the  real  necessities  of 
trade;  a  board  whose  duty  it  shall  be  to  enforce 
such  regulations  as  are  necessary  to  the  common 
good  and  in  accord  with  the  usages  and  necessities 
of  business;  a  board  that  is  honestly  bent  ujoou  ful- 
filling the  office  of  tin  impartial  arbiter,  is  desirable 
from  every  point  of  view.  Correct  principles  and 
necessary  conditions  must,  however,  be  observed  in 
its  formation. 

Such  a  board  must  not  be  based  upon  provincial 
ideas  or  imaginary  situations.  Its  influence  and  mem- 
bership must  not  be  apportioned  between  the  railways 
and  the  public,  accordingtothe  measure  of  their  influ- 
ence or  I'espective  wealth,  or  upon  anj^  other  assumed 
basis,  but  must  be  at  once  general,  dignified,  and 
honorable.  It  must  be  formed  with  the  single  pur- 
X)ose  of  accomplishing  whatever  measure  of  public 
good  its  necessarily  restricted  office  renders  possible. 
It  must  be  a  board  favorable  to  the  railroads,  as  a 
whole,  and  equally  favorable  to  the  rights  and  privi- 
leges of  other  interests:  a  board  that  recognizes 
that  railways  are  and  must  be  operated  in  harmony 


186  RAIL  WA  Y  BA  TE8 

with  general  principles  of  business;  a  board  that 
recognizes  that  railroads  must  adjust  themselves  to 
the  conditions  of  trade  from  day  to  day,  according 
to  the  exigencies  of  business,  as  they  arise. 

Such  a  board  would  x^ossess  great  value,  and  would 
be  worthy  of  the  intelligence  and  integrity  of  a  great 
people.  Its  conclusions  Avoukl  be  authoritative.  It 
would  exercise  a  peculiarly  conservative  influence, 
and  under  its  j)rotection  the  rights  and  privileges  of 
railway  i^roperty  would  be  more  fully  assured.  This 
great  public  service  and  agreeable  duty,  in  the  United 
States,  falls  naturally  to  the  Interstate  Commerce 
Commission  and  the  various  State  commissions. 

A  country  whose  railways  are  unproductive,  or 
unjustly  harassed  in  their  operations,  is  like  a  man 
whose  legs  are  paralyzed.  He  may,  indeed,  move 
about,  and  continue,  for  a  while,  to  eat  and  drink; 
but  his  days  are  as  the  grass.  The  affliction  that 
first  manifests  itself  in  his  extremities,  soon 
spreads  to  his  vital  organs,  and  he  languishes  and 
dies.  All  the  peculiarities  of  men' s  lives  are  repro- 
duced in  the  trade  they  create.  We  see  it  in  the 
inception,  growth,  development,  and  decay  of  busi- 
ness enterprises.  Abnormal  conditions  affect  the 
trade  of  a  country  exactly  as  they  affect  man.  In 
order  to  realize  the  highest  possible  condition,  the 
I)arts  that  go  to  make  ui^  the  whole  must  be  health- 
ful and  harmonious.  No  particular  class,  or  indus- 
trial interest,  can  be  permanently  built  up  at  the 
expense  of  others.  The  granger  agitation  in  the 
United  States  aptly  illustrates  this.  At  that  time, 
the  agricultural  limit  had  been  extended  beyond 


AKD  GOVERNMENT  CONTROL.  187 

the  just  bounds  of  prudence  or  public  need.  Prices 
were  greatly  depressed  in  consequence.  The  af- 
flicted joeople  sought  to  transfer  their  burden  to  the 
railway  companies  by  arbitrary  reductions  of  rates. 
Laws  were  passed  with  this  object,  without  reference 
to  the  necessities  of  carriers  or  the  equities  of 
vested  rights.  The  railroads  were  crippled,  and 
their  earning  capacity  diminished.  Their  ability  to 
meet  necessary  expenditures  and  interest  was  im- 
paired. This  affected  their  credit.  The  alarm  spread 
to  other  interests,  upon  which  ensued  all  the  con- 
ditions of  a  financial  crisis.  This  was  followed  by 
long-continued  depression,  until,  through  natural 
growth,  the  railway  companies  were  compensated 
by  increased  business  for  the  losses  they  had  suf- 
fered, and  capital  was  induced  once  more  (by  repeal 
of  the  obnoxious  measures)  to  seek  investment  in 
the  district  where  the  agitation  originated. 

As  I  have  pointed  out,  the  construction  of  a 
parallel  road  does  not  involve  immediate  hardship. 
Directly  the  reverse.  Money  is  plentiful  ;  prices 
advance  ;  no  increase  of  rates  follows.  Quite  likely 
rates  are  lowered,  temporarily  at  least,  in  the  strife 
that  ensues.  The  people  have,  moreover,  two  lines 
instead  of  one,  and  henceforth  may  exercise  some 
choice  as  to  which  they  will  patronize.  Accommo- 
dation has  for  the  moment  been  increased.  Super- 
ficially viewed,  therefore,  they  are  the  gainers.  This 
is  as  far  as  they  care  to  pursue  the  subject.  But  if 
the  new  road  had  been  excluded,  the  existing  line 
would  have  been  able,  sooner  or  later,  to  reduce  rates 
because  of   a   superabundant   revenue.      Thus  its 


188  BAIL  WAY  BATES. 

prosjierity  would  liave  been  a  source  of  saving  to 
the  community.     But  with  two  roads  reduction  is 
impossible.     The  i^eople  do  not  stop  to  trace  the 
cause.     They  have  a  vague  feeling  that  rates  ought 
to  be  reduced.     Their  desire  finds  expression  in  the 
acts  of  legislatures,  in  the  voice  of  newspapers,  in 
public  agitation,  in  j)rivate  petition,  and  general  dis- 
content.    What  is    the   remedy'^     Manifestly    the 
prohibition  of  duplicate  roads.     When,  therefore, 
proi)osal  is  made  hereafter  to  parallel  an  existing 
line  or  build  into  its  territory,  let  the  government  say, 
through  its  commissioners,   "  This  line  is  unneces- 
sary ;  competition  is  assured  ;  the  present  company 
is   abundantly   able  to  aiford   the  accommodation 
needed  ;  the  new  line  will,  moreover,  retard  reduc- 
tions in  rates  ;  will  x)revent  the  existing  line  from 
affording  the  abundant  and  cheaj)  service  that  it 
ultimately  may  if   allowed  the  whole  business." 
The  agents  of  governments  may  also  be  made  con- 
servators in  another  direction.     They  may  prevent 
the  construction  of  lines  in  advance  of  their  need. 
When  it  is  prox)Osed  to  build  a  railroad  that  mani- 
festly will  not  pay,  that  is  not  needed,  that  is  in 
advance  of  its  time,  let  the  government  say:   "  Stop  ! 
There  is  no  demand  for  this  road  ;  it  is  purely  sjDecu- 
lative ;  its  construction  will  have  the  effect  to  draw 
capital  from  active  employment  to  be  locked  up  in 
unproductive  enterprise  ;  when  there  is  need  for  a 
line  let  it  be  built ;  let  supply  go  hand  in  hand  with 
demand."  * 


*  The  exercise  of  this  power  -will  prove  especially  valuable  in  the 
case  of  railroads  l)uill  largely  l)y  public  aud  private  aid.  Such 
properties  are  always  more  or  less  artificial. 


AND  GOVERNMENT  CONTROL.  189 

From  whatever  standpoint  the  subject  is  viewed, 
over-j)roduction  in  railroads  is  a  hardship  to  the 
peoi)le.  We  can  not  remedy  what  is  past.  The 
water  that  has  gone  over  the  dam  has  been  lost. 
But  the  remedy  for  existing  evils  does  not  lie  in 
legislative  enactments,  in  enforced  levies;  but  in 
patient  forbearance  until  such  time  as  the  country 
grows  uj)  to  the  needs  of  existing  lines.  There  is 
no  other  course. 

Railways,  like  other  manufacturers,  sympathize 
with  those  to  whom  they  look  for  business.  No 
power  can  keep  rates  higher  than  circumstances 
justify.  They  are  the  result,  as  has  been  shown,  of 
na.tural  laws.  They  must  be  equitable.  When  they 
cease  to  be  so,  production  ceases. 

The  interests  of  the  railroads  and  the  country  are 
identical.  No  one  understands  this  better  than  the 
owners  of  railroads,  and  when  I  speak  of  them,  I  do 
not  refer  to  great  capitalists.  They  own,  at  best, 
but  a  part.  They  are  leaders  because  of  their  great 
talents  and  wealth.  Their  interest  is  not  relatively 
large,  when  we  consider  gross  values.  The  real 
owners  of  railways,  and  those  to  whom  we  are  in- 
debted for  our  great  strides  in  commerce  and  trade, 
are  small  holders. 

Those  who  own  railroads  alone  j)0ssess  the  ad- 
ministrative ability  to  manage  them;  they  alone 
possess  the  ability  to  discern  where  capital  may  be 
used  advantageously.  They  form  the  advance  guard 
of  every  great  enterj)rise,  an  integral  part  of  the 
country,  a  valuable  element  without  which  its 
natural  resources  would  avail  little.     Their  motives 


190  RAILWAY  RATES 

should  not  be  imj)ugned,  nor  should  we  doubt  the 
amiability  of  their  desires  more  than  those  of  other 
men.  Unjust  or  intemperate  abuse,  whether  be- 
stowed upon  the  interest  they  represent  collectively 
or  upon  them  as  individuals,  can  not  but  react 
disastrously  on  the  community  x^racticing  it. 

Wherever  railroads  do  not  furnish  adequate  or 
safe  accomodation,  or  their  methods  are  improper, 
it  is  a  legitimate  subject  of  criticism.  But  such 
criticism  is  vastly  different  from  an  attack  upon 
capital.  One  is  beneficial;  the  other  ruinous.  Un- 
der the  granger  agitation,  already  referred  to,  rail- 
way values  were  depreciated  to  an  enormous  extent, 
partly  through  loss  of  revenue  and  partly  from  ner- 
vous apprehension.  The  effect  was  perceptible  for 
many  years  afterwards  in  every  dei)artment  of 
industry,  and  it  was  only  when  capitalists  found 
that  the  conservative  class  had  overcome  the  ag- 
gressors, that  business  revived  and  men  were  found 
courageous  enough  to  invest  in  existing  railroads,  or 
provide  means  for  the  construction  of  new  ones. 

The  sovereignty  of  the  people,  about  which  so 
much  is  said,  and  very  properly,  too,  is  not  to  be 
questioned;  but  a  people  can  not  transgress,  any 
more  than  individuals,  the  natural  laws  that  govern 
commercial  and  financial  affairs.  No  class  or  aggre- 
gation of  classes,  however  numerous  or  powerful, 
can  conspire  to  oppress  others,  without  destroying 
the  basis  and  underlying  principle  of  commercial 
life,  without  precijiitating  their  own  ruin  with  that 
of  the  interests  they  attack.  These  truths,  however 
self-evident  they  may  be  to  economists,  can  not  be 


AND  GOVERNMENT  CONTROL.  191 

too  frequently  reiterated.  The  railway  companies 
of  the  United  States  have,  in  every  stage  of  their 
existence,  shown  a  disposition  to  meet  every  legiti- 
mate responsibility.  They  have  been  superior  to 
the  harsh  judgment  that  has  been  passed  upon 
them.  We  can  not  trace  their  experiences  except 
with  wonderment;  great  newspapers  have  assailed 
them  with  unbridled  fury;  politicians  have  sought 
to  undermine  them  with  the  people;  juries  have 
denied  them  justice;  legislatures  have  openly  im- 
pugned their  motives  and  questioned  their  methods; 
the  public  has  refused  to  give  them  its  confidence 
or  sympathy;  every  species  of  folly,  every  device  of 
malice,  the  impossible  requirements  of  ignorance, 
the  selfish  cunning  of  personal  interest,  the  ravings 
of  demagogues,  the  disappointments,  jealousies, 
prejudices,  and  hatreds  of  mankind  have  each,  in 
turn  and  in  unison,  assailed  them.  Denied  every 
virtue,  no  accusation  has  been  too  monstrous  to 
find  believers. 


CHAPTER    IX. 

RAILWAY  RATES  AND  GOVERNMENT  CONTROL — RAIL- 
WAY GROWTH  IN  THE  UNITED  STATES  :  PRESENT 
STATUS — METHODS  OE  RAILROADS — THE  LIMITS 
WITHIN  WHICH  LEGISLATIVE  INTERFERENCE  IS 
VALUABLE. 

The  railway  system  of  the  United  States,  as  it 
exists  to-day,  is  an  afterthought,  a  makeshift, 
fragmentary,  illy  conceived,  incongruous.  In  the 
beginning,  railroads  were  located  with  reference  to 
local  traffic  only,  with  regard  to  their  profitable- 
ness as  short  lines.  Through  business  was  a  remote 
contingency,  something  uncertain  and  vague,  too 
purely  speculative  to  merit  more  than  a  passing 
thought.  It,  however,  grew  apace,  and  with  in- 
crease of  wealth,  and  knowledge  of  manijDulation, 
the  process  of  amalgamating  petty  interests  began. 
At  first,  only  continuous  lines  were  consolidated. 
Then  diverging  lines  were  absorbed;  afterward, 
competitive  interests.  Isolated  roads  were  bought 
and  consolidated,  in  many  cases,  to  meet  contingent 
I)ossibilities.  The  consolidation  of  roads  having 
little  or  nothing  in  common  rendered  it  necessary  to 
construct  connecting  links  to  weld  them  together. 
In  the  course  of  time,  the  necessity  of  connect- 
ing the  great  enterprises  thus  formed  with  distant 
markets    not    considered    in    the    original  scheme, 

13  (193) 


194  BAILWAY  RATES 

forced  itself  on  the  attention  of  owners.  This  in- 
volved further  building,  the  paralleling  of  existing 
lines,  and  other  incongruous  acts.  In  this  "  piecing 
out"  process,  this  attempt  to  derive  order  out  of 
chaos,  primary  conditions  were  reversed,  and  local 
traffic,  from  being  a  i^rime  factor,  became  of  sec- 
ondary importance.  Not  only  this,  but  the  new 
lines,  in  many  instances,  by  dividing  the  local  busi- 
ness, destroyed  its  profitableness. 

The  railway  situation  was  furtlier  aggravated  by 
the  i)resence  of  many  roads  built  for  purely  specu- 
lative i:)urposes,  or  to  satisfy  the  sentiments  of  petty 
districts.  The  process  of  evolution  is  still  going  on, 
but  becomes  each  day  more  and  more  simjple. 

Under  the  policy  of  giving  bounties,  the  region 
east  of  the  Missouri  has  been  honeycombed  with 
roads  not  contemplated  in  the  original  scheme. 
Many  of  them  would  not  have  been  allowed,  had  ^er- 
mission  from  an  impartial  government  board  been 
required.  Our  railway  system,  having  thus  grown 
up  under  anomalous  conditions,  requires  anomalous 
treatment.  It  is  distinctively  competitive.  It  is 
not  homogeneous. 

The  weakness  of  the  railway  system  of  the  United 
States  has  found  frequent  expression  in  the  destruc- 
tive warfare  of  rival  companies.  The  introduction 
of  iDools  (whereby  business  common  to  two  or  more 
lines  is  equitably  apportioned),  was  the  remedy 
whereby  rail  way  ■  owners  and  managers  sought  to 
mitigate  the  evil.  Unfortunately,  however,  the 
remedy  could  only  be  partially  applied  without  the 
protection  of  the  government — without  the  power 


AND  GOVERNMENT  CONTROL.  195 

to  control  those  who  transgressed  its  requirements. 
This  protection  the  government  not  only  refused, 
but  finally  j^assed  a  law  prohibiting  carriers  from 
entering  into  any  kind  of  pooling  arrangement 
whatsoever.  No  other  country  in  the  world  so 
greatly  needs  the  aid  of  this  device  as  the  United 
States,  because  of  the  chaotic  nature  of  its  railway 
system,  and  yet  the  United  States  is  the  only  coun- 
try where  it  is  denied  to  carriers.  The  law  referred 
to  was  in  keeping  with  public  sentiment — with  the 
desire  to  outlaw  railway  jDrox^erty.  The  peoi3le  had 
long  been  told  that  railway  companies  were  extor- 
tioners, public  robbers,  to  be  placed  under  the  sur- 
veillance of  the  police.  They  did  not,  therefore, 
care  to  protect  them.  Ignorance  and  demagogism 
had  full  sway.  Legislation  intended  to  weaken  the 
hands  of  managers,  or  cut  down  rates,  everywhere 
elicited  apjDroval.  There  was  nowhere  a  disposition 
to  aid  in  preventing  rate  wars.  Directly  the  reverse. 
Laws  were  passed  j)ermeated  with  the  false  doctrine 
that  the  direct  intervention  of  the  government  was 
necessary  to  prevent  the  community  from  being 
injured  by  excessively  high  rates. 

It  was  sought  to  inculcate  the  belief  that  we 
should  look  to  the  government,  rather  than  to  the 
owners  of  railway  j)roperty,  for  honesty  and  wisdom; 
to  a  X)erf  unctory  service,  rather  than  a  discerning  and 
intelligent  one.  In  framing  tariffs,  economic  laws 
were  no  longer  to  be  regarded.  The  law  of  supply 
and  demand  was  no  longer  to  be  considered.  The 
belief  was  general  that  rates  were  excessive.  No- 
where was  the  governing  x^rinciple  recognized  that. 


196  BAIL  WA  T  BATES 

while  rates  may  be  too  low,  the  equities  of  trade 
prevent  their  being  too  liigh.  The  owners  of  railways 
were  scoffed  at.  Tlie  selfish  interest  they  have  in 
protecting  and  fostering  the  traffic  tributary  to  their 
lines,  was  ignored  or  disx)uted.  They  were  to  be 
regulated  arbitrarily.  Ever_y  one  was  to  be  j)rotected, 
save  the  carrier.  Uniformly  fair  rates  were  to  give 
place  to  uniformly  low  rates.  Artificial  competition 
was  to  be  general,  instead  of  excej)tional.  The  statute 
books  were  filled  with  penalties  against  discrimi- 
nation. These  enactments,  savoring  of  the  blue  laws 
of  Connecticut,  were  an  invocation  to  the  discon- 
tented, a  theme  and  justification  for  agrarian 
agitators.  They  covertly  branded  the  owners  and 
managers  of  railways  as  knaves  or  fools.  They 
taught  that  associated  capital  was  robbery;  that  it 
was  unjust  and  overreachiag.  Those  who  criticised 
railroads  alone  were  honest.  The  disposition  was 
general  to  cater  to  the  prejudices  of  the  x^eople, 
rather  than  the  wants  of  trade.  The  accomi)lish- 
ment  of  political  rather  than  business  ends  was 
sought.  The  aggrandizement  of  parties  and  the 
fulfilment  of  personal  ambitions,  rather  than  the 
good  of  the  country,  became  the  ruling  idea.  Laws 
were  based  on  the  theory  that  the  railway  problem 
was  a  special  one,  exempt  from  economic  conditions 
governing  other  industries ;  that  the  law  of  com- 
jietition  did  not  apply  to  carriers;  that  their  duties 
and  resjionsibilities  might  be  measured  as  we  measure 
grain.  The  subtleties  of  trade  that  can  not  be  dis- 
regarded, that  characterize  the  traffic  of  railways  as 
much  as  that  of  other  manufacturers,  were  ignored. 


AKD  GOVERNMENT  CONTROL.  197 

Railway  administration  was  to  be  brought  down  to 
tlie  comprehension  of  school  children.  Public 
ox^inion  was  perverted;  it  utterly  failed  to  com- 
prehend the  situation.  It  sought,  in  the  enactment 
of  agrarian  laws  against  railroads,  relief  that  should 
have  been  looked  for  in  other  directions.* 

The  equities  of  railroad  traffic  are  variable  and 
fortuitous.  We  can  not  describe  them.  As  well 
might  we  attempt  to  teach  the  art  of  violin-playing 
by  descriptive  writing,  to  fathom  the  subtleties  of 
men's  minds,  to  comprehend  their  purposes,  or 
measure  their  energies.  They  must  be  studied  to 
be  understood.  The  operation  of  railroads  requires 
practical  business  experience,  boundless  patience,  a 
desire  to  please,  promi)titude,  knowledge  of  detail, 


*Iu  criticising  the  ill  advised,  imperfect,  and  hastily-considered 
laws  that  have  been  passed,  and  the  indefensible  acts  that  have 
characterized  their  enforcement,  I  do  not  by  any  means  wish  to  be 
understood  as  asserting  or  believing  that  all  who  advocated  or  voted 
for  such  laws  were  lacking  in  wisdom  or  sincerity.  Far  from  it.  I 
do  not  believe,  for  instance,  that  the  Senate  and  House  of  Representa- 
tives were  actuated  by  other  than  the  most  patriotic  motives  in 
passing  the  Interstate  Commerce  act.  Nor  did  they  act  hastily.  If 
the  law  is  grossly  defective  in  some  respects,  it  is  because  the  needs 
of  the  situation  were  not  fully  understood.  And  in  this  connection 
I  wish  to  excuse  myself  if  what  I  have  written  has  the  appearance  of 
prejudice  or  undue  vehemence.  The  matter  is  one  about  which  I 
have  thought  much.  My  opportunities  for  thirty-five  years  have 
been  especially  favorable  for  observing  and  understanding  the 
methods,  policies,  and  motives  of  railway  companies.  I  know  them 
to  be  generally  good,  such  as  the  country  needs,  at  once  business- 
like, sagacious  and  honorable.  I  know,  also,  that  as  a  rule,  those 
who  criticise  them  are  not  nearly  so  patriotic,  wise,  or  unselfish,  as 
the  owners  of  railroads;  not  nearly  such  good  citizens;  do  not  con- 
tribute nearly  so  much  as  they  to  aggrandize  the  country. 


198  RAILWAY  BATES 

ubiquity.  Wherever  governments  interfere,  their 
interference  must  contemphite  simihir  labors  and 
experiences.  They  are  manifestly  unequal  to  tlie 
task.  To  invest  government  with  the  authority  to 
make  rates,  or  actively  interfere  with  other  business 
matters,  is  to  make  the  creative,  aggressive  genius 
of  a  nation  conform  to  the  contracted  sx)here  of 
mechanical  action.  Such  a  course  is  destiaictive. 
The  agents  of  government  should  be  endowed  with 
great  i^ower;  with  the  authority  of  arbitrators  and 
judges  in  the  disputes  that  arise  between  carrier  and 
I)atron.  But  acts  upon  which  they  pass  should  be 
specific,  carefully  xoarticularized ;  should  not  extend 
to  an  adjudication  of  economic  conditions  or 
methods. 

Nothing  illustrates  the  prejudices  and  passions  of 
mankind  more  aptly  than  its  treatment  of  rail- 
ways in  the  United  States.  These  properties  have, 
in  their  progress,  been  made  the  subject  of  every 
condition;  of  romantic  enactments,  imaginary  neces- 
sities, undue  expectation,  misconception,  public  dec- 
lamation, and  general  clamor.  Their  owners,  from 
being  the  recipients  of  personal  and  civic  attention, 
have  reached  a  level  where  their  high  intelligence, 
their  courage,  their  enterprise,  their  honesty,  are, 
one  and  all,  denied,  or  forgotten. 

The  people  are  disj)osed  to  question  the  fact  that 
the  railway  business  is  governed  by  the  same 
principles  as  other  business,  and  does  not  invite  the 
initiative  or  intervention  of  the  government,  any 
more  than  the  business  of  raising  corn.  A  law- 
maker who  should  assume  it  to  be  his  duty  to  fix 


AND  GOVERNMENT  CONTROL.  199 

the  price  of  agricultural  implements,  lumber,  cattle, 
machinery,  calico,  or  tea,  would  be  hooted  out  of 
the  community  as  unfit  to  be  trusted.  And  yet  that 
is  exactly  what  is  proposed  for  railroads.  One  is 
as  reasonable  as  the  other.  The  thought  is  x3ro- 
vincial,  restricted,  narrow.  It  weighs  the  welfare  of 
an  empire  in  the  balance  against  the  interests  of  a 
particular  person  or  market. 

Many  of  the  embarrassments  and  misconceptions 
that  attend  the  oi)erations  of  railways  in  the  United 
States,  grow  out  of  the  indiscriminate  construction 
of  such  proiDerties  that  we  have  encouraged.  The 
situation  is  a  i)erplexing  one,  but  not  such  as  to 
excite  uneasiness  or  distrust.  Its  solution  is  sim- 
ple. In  the  matter  of  rates,  about  which  the  j)ublic 
is  most  concerned,  what  is  required  is  a  law  that 
recognizes  that,  like  other  prices,  they  are  based  on 
economic  conditions;  that  they  can  not  be  too  high, 
because  competitive  influences  forbid;  but  that  they 
may  be  too  low,  owing  to  the  strife  of  local  carriers. 
What  is  required  is  a  law  that  will  modify  the 
latter;  that  will  prevent  competitive  rates  from 
being  disturbed,  except  ujDon  economic  grounds.  A 
law,  in  fact,  that  shall  not  forbid  pooling;  that  shall 
distinctly  recognize  its  equity.  This  right  is  not  with- 
held, or  its  rightfulness  questioned,  anywhere  else. 

Our  laws  jprevent  excessive  rates,  but  we  have 
none  that  insures  reasonable  rates;  we  are  carefully 
guarded  from  an  impossible  evil,  but  left  ex^josed 
to  one  that  is  real. 

The  railway  situation  in  the  United  States  sug- 
gests a  law  designed  to  prevent  wastage  of  the 


200  EAILWAY  BATES 

resources  of  railways — a  law  that  will  prevent 
internecine  wars.  But  in  devising  this  relief,  the 
responsibility  of  those  who  own  railroads  must  not 
be  destroyed.  It  may  be  regulated.  They  alone 
are  equal  to  the  emergency  of  management;  they 
alone  understand  the  constantly  changing  require- 
ments of  commerce;  they  alone  have  the  means  to 
meet  them.  The  situation  requires  legislation  that 
will  afford  railroads  protection  and  encouragement 
without  crippling  them,  or  through  them,  the 
country.* 


*  This  chapter  was  written  in  1886.  I  merely  revise  it.  While 
there  has  been  much  legislation  since  that  time,  I  do  not  see  wherein 
I  can  change  what  I  then  wrote.  It  was  true  then.  It  is  true  now. 
Railroad  wants  are  still  the  same.  The  mistake  that  the  public 
and  public  servants  make,  is  in  treating  exceptions  in  railway 
practice  as  conditions;  in  mistaking  surface  indications  for  funda- 
mental principles;  in  treating  local  distempers  as  constitutional 
maladies;  in  applying  the  surgeon's  knife  wlicn  a  mild  poultice  is  all 
that  is  required;  in  acting  hastily,  and  oftentimes  not  upon  experience 
or  wise  counsel.  The  railway  situation  requires  the  strengthening 
of  the  hands  of  owners. 

Per  contra,  what  I  wrote  in  regard  to  railway  rates,  I  find,  upon 
further  study  and  reflection,  to  be  lacking  in  adequate  comprehension 
of  the  subject.  So  greatly  have  I  been  impressed  with  this  fact,  that 
everything  I  have  published  on  the  subject  heretofore  I  have,  so  far 
as  possible,  withdrawn  and  destroyed.  I  ascribed  undue  importance 
to  the  cost  of  a  property;  also  to  the  discretion  of  carriers.  The 
cost  of  a  property  practically  cuts  no  figure  in  fixing  the  rate,  while 
the  discretion  of  the  carrier  is  so  limited — applies  to  only  so  small 
a  part  of  the  traffic  he  handles — that  when  we  consider  the  business 
as  a  whole,  we  find  he  has,  practically,  no  discretion  whatever. 
It  is  like  that  of  a  merchant,  who  may  put  up  the  price  a  little  on  an 
odd  article,  but  on  the  great  bulk  of  his  goods— on  everything  of 
consequence  to  the  community — the  price  is  determined  for  him  by 
influences  that  he  has  no  control  over  whatever. — M.  M.  K. 


AND  GOVERNMENT  CONTROL.  201 

The  nntrammeled  operation  of  railroads  is  neces- 
sary to  the  freedom  of  trade,  the  interchange  of 
commodities,  the  prosperity  of  business,  the  growth 
of  a  country.  We  can  not  wrap  them  in  the  cere- 
ments of  mummies,  or  chain  tliem  to  arbitrary  con- 
ditions, and  expect  them  to  fulfill  the  vital  and 
active  functions  of  their  office.  If  untrammeled,  they 
will  effect  the  widest  possible  interchange  of  traffic 
betw^een  the  markets  of  a  country.  We  cannot  fix 
the  rates  they  shall  charge  in  accomi^lishing  this 
end,  in  the  mechanical  manner  that  we  measure 
lumber,  or  count  the  telegraph  x^oles  that  line  our 
public  highways.  They  must  be  determined  as 
exigencies  arise,  according  to  the  equities  of  trade. 
The  question  is  an  economic  one,  and  must  be  so 
treated  by  governments.  Wherever  governments 
meddle  in  such  affairs,  their  action  (if  designed  to 
benefit  mankind)  will  be  exceedingly  moderate.  It 
will  be  suggestive  rather  than  mandatory.  Govern- 
ment agents  empowered  to  supervise  railw^ay  affairs 
should  not  be  accorded  too  much  power.  It  can  not 
be  used  safely  or  wisely.  This  will  be  especially 
true  at  first.  Afterward,  as  practical  experience 
suggests,  the  power  may  be  enlarged.  But  experi- 
ence will  hardly  invite  this.  The  necessity  for 
governmental  regulation  of  railroads  will  ever  be 
found  to  be  more  imaginary  than  real.  Needed 
legislation,  here  as  elsewhere,  is  that  which  attracts 
the  least  attention,  about  which  there  is  the  least 
clamor.  Legislation  designed  to  prevent  undue 
multiplication  of  railroads,  to  stop  railroad  wars, 
will  never  greatly  interest  the  people,  but  they  will 


303  BAILWAY  RATES 

clamor  incessantly  I'or  protection  against  purely 
ideal  dangers.  The  law-making  jDower  must  notice 
these  sentimental  cravings  doubtless,  but  in  doing 
so  need  not  injure  any  real  interest. 

Laws  regulating  railroads  should  be  generally  of 
a  judicial  character.  They  should  empower  the 
officers  of  government  to  listen  to  the  complaints  of 
carriers  and  shipj^ers,  and  to  investigate  the  causes 
thereof  and  the  remedies  therefor;  to  prevent  un- 
just discrimination,  if  found  to  exist ;  to  make  sug- 
gestions where  the  railroads  or  the  public  are  in 
the  wrong,  or  peace  and  good  government  may  be 
advanced  thereby ;  to  see  that  necessary  police 
regulations  are  enforced  and  that  reasonable  facili- 
ties are  furnished ;  to  investigate  accidents  and 
make  inquiries  connected  therewith  ;  to  collect  and 
publish  the  returns  of  railroads  ;  to  inquire  into  the 
traffic  agreements,  contracts,  and  understandings  of 
carriers,  and  to  legalize  and  enforce  such  agreements, 
when  not  inconsistent  with  the  public  good,  and, 
finally,  to  x)revent  the  construction  of  unnecessary 
railroads.  They  should  not  be  creative,  but  super- 
visory merely.  Such  laws  are  practical,  safe,  and 
needed.  They  will  not  in  any  way  restrict  indus- 
trial freedom  ;  will  not  create  conditions,  but  ame- 
liorate them ;  will  not  destroy  the  individuality 
of  the  citizen,  but  intensify  it.  The  railway  system 
and  the  interests  it  affects  are  too  vital  to  the  well- 
being  of  a  country  to  be  made  the  subjects  of  arbi- 
trary, ill-tempered,  or  hasty  action.  Interference 
must  be  circumscribed  and  guarded.  An  industry 
that  requires  the  uninterrupted  labor  of  an  army  of 


AND  GOVERNMENT  CONTROL.  203 

experienced  and  able  men,  in  shaping  its  policy  and 
adjusting  its  aif airs,  cannot  intelligently  or  safely  be 
subjected  to  the  arbitrary  interference  of  men  less  in 
number  or  experience ;  cannot  be  safely  taken  out 
of  the  hands  of  owners  and  transferred  to  the  hands 
of  those  whose  interests  are  merely  i^erf unctory. 


CHAPTER  X. 

valuj:  of  private  ownership    and    interest — 
government  control:  its  inadequacy. 

When  anything  goes  wrong  in  the  world,  or 
seems  to  go  wrong,  the  ignorant  and  thoughtless 
everywhere,  rise  up  and  call  upon  the  government 
to  interfere,  as  if  a  perfunctory  body,  made  up  of 
agents,  loosely  selected  at  best,  was  more  trust- 
worthy than  the  masses,  from  which  it  derives  life. 
Government  interference  is  the  sine  qua  non  of 
young  people,  the  hopeful,  confiding,  and  simple. 
It  is  the  panacea  of  oranks  and  schemers.  It  is 
never  fully  adequate.  It  lacks  in  intelligent  in- 
terest, energy,  and  adaptability.  It,  moreover,  has 
the  effect  to  weaken  personal  interest  and  individual 
effort.  Its  substitution  for  j)rivate  effort  is  to  trade 
off  the  practical  experience  and  enthusiasm  of  a 
nation  for  the  service  of  hired  men.  But  in  ques- 
tioning the  ability  of  governments  to  carry  on  affairs 
effectively  and  economically,  the  basis  of  objection 
should  not  be  misunderstood.  It  is  not  that  the 
subordinate  officials  of  a  government,  those  who 
really  do  its  work,  are  not  able  and  trustworthy, 
but  that  they  lack  the  peculiar  kind  of  executive 
and  administrative  talent  that  is  needed. 

The  carrying  on  of  government  is  a  business  in 
which    the  government  employe    performs  duties 

(205) 


206  BAIL  WAY  BATES 

somewhat  analagous  to  those  of  a  merchant,  mami- 
facturer,  or  banker.  He  both  originates  and  directs. 
He  is  not  fitted  for  such  duties.  His  genius  lies  in 
another  direction.  He  lacks  the  self-reliance,  the 
aggressiveness,  the  foresight,  the  instinct  of  trade, 
the  amiability,  that  the  merchant  possesses.  If  he 
had  these  qualities,  he  would  not  be  working  for  the 
government;  he  would  be  a  trader,  manufacturer, 
banker,  or  capitalist.  Moreover,  the  incentive  of 
personal  gain,  the  projDelling  force  of  the  world,  is 
lacking.  Thus  essential  qualities,  necessary  to  carry 
on  any  kind  of  business  successfully,  are  wanting. 
Their  absence  is  fatal.  This  is  why  everything  a 
government  does  is  poorly  done  compared  with  the 
achievements  of  j)rivate  individuals. 

Nothing  that  the  industry,  ingenuity,  or  enter- 
prise of  a  people  leads  them  to  do  on  their  own 
account,  should  be  undertaken  by  a  government. 

The  intervention  of  governments  in  the  affairs  of 
business  emasculates  men,  dulls  their  inventive 
genius,  chills  their  ardor,  robs  them  of  their  inde- 
pendence, lessens  their  patriotic  instincts,  reduces 
their  sense  of  i^ersonal  obligation.  It  takes  the 
affairs  of  a  nation  (so  far  as  the  intervention  ex- 
tends) out  of  the  hands  of  natural  leaders,  and  jDuts 
them  into  the  hands  of  clerks;  it  is  to  substitute 
mediocrity  for  talent,  mechanical  effort  for  creative 
genius,  j)erfunctory  service  for  interested  effort. 
The  few  men  of  wise  judgment  and  great  experi- 
ence, who  have  charge  of  the  great  departments  and 
bureaus  of  a  government,  are  not  sufficient  in  number 
to  relieve  the  service  of  this  just  criticism.     Thus, 


AND  GOVERNMENT  CONTROL.  207 

our  Interstate  Commerce  Commission,  and  the  Board 
of  Trade,  of  England,  with  their  staifs,  while 
made  w.])  of  men  of  great  ability,  are  as  a  drop  in 
the  bucket.  They  are,  in  fact,  only  equal  in  num- 
ber to  the  j)ractical  men  that  every  railroad  finds  it 
necessary  to  employ  for  its  own  use. 

Governmental  management  lacks  spirit,  alertness, 
and  a  desire  to  please.  It  is  at  once  meddlesome, 
slow,  cumbersome,  and  bumptious.  The  absence  of 
gain  robs  it  of  energy  and  a  desire  to  j)lease.  Its 
acts  are  lacking  in  promptness  and  natural  adjust- 
ment. It  is  slow  to  make  changes;  is  loth  to  run 
counter  to  established  practices,  even  when  the 
interests  of  a  country  demand  it.  It  is  governed  by 
I)recedent,  instead  of  practical  needs;  by  formu- 
las, instead  of  i)rinciples;  by  the  adaptations  of 
theorists,  instead  of  business  men.  It  lacks  com- 
mercial shrewdness.  Under  it,  circumlocution,  in- 
stead of  being  a  mere  incident  of  business,  becomes 
a  ruling  principle,  impossible  to  overcome  or  miti- 
gate, because  carried  out  ostensibly  in  the  interests 
of  the  people. 

In  the  ratio  that  corporate  service  falls  below  the 
high  standard  of  private  endeavor,  so  does  govern- 
mental service  fall  below  that  of  private  corpora- 
tions. It  lacks  the  vitalizing  force  infused  into 
cor]porate  life  by  the  owner;  .it  lacks  his  directing 
energy  and  intelligence,  his  genius  and  self-interest, 
his  personal  concern,  and  suiDervisory  usefulness. 
It  is  mechanical  and  j)lodding.  Thus  in  no  instance 
has  the  train-service  of  railroads  managed  by  gov- 
ernments kept  pace  with  that  of  lines  oi)erated  by 

14 


208  BAIL  WA  Y  RA  TES 

private  corporations,  either  as  regards  safety  or 
efficiency. 

Under  every  form  of  government,  the  methods  of 
the  operative  are  all-important.  Public  convenience 
is  secondary  with  him,  although  he  is  unconscious 
of  the  fact.  As  the  representative  of  the  jDeople,  he 
is  not  to  be  lightly  disturbed.  Invention  and  inno- 
vation are  synonymous  terms  with  him.  Change 
and  betterment  do  not  add  to  his  comfort  or  for- 
tune. But  they  do  add  to  his  labor.  Moreover, 
they  may  occasion  criticism.  Under  him,  complex- 
ity gradually  usurjos  the  i^lace  of  simplicity;  it  adds 
to  his  importance,  and  affords  him  a  screen  behind 
which  he  can  hide.  Clericalism  envelops  every- 
thing he  does.  Obsolete  tools  are  his  favorite  uten- 
sils. He  is  familiar  with  them.  He  makes  up  in 
metajphysical  dissertation  what  he  lacks  in  practical 
sense  and  usefulness.  The  railroads  he  constructs 
are  such  as  the  engineer  wants,  rather  than  the 
trader.  In  operating  them ,  cost  is  in  the  inverse  ratio 
to  efficiency.  His  tariffs  are  based  on  mathematical 
formulas,  rather  than  the  needs  of  trade.  In  every- 
thing he  is  a  stickler  for  uniformity.  It  saves  men- 
tal labor.  In  railway  j)ractice,  it  is  his  desire  to 
base  rates  on  expenses  and  interest,  rather  than  on 
quality  of  service  or  value.*  The  picture  is  not 
exaggerated. 

No  kind  of  business  can  be  carried  on  by  govern- 


*And  when  we  remember  how  greatly  cost  of  operation  is 
heightened  by  his  inefficiency  and  cumbersome  methods,  we  may 
form  some  estimate  of  what  his  tariffs  are,  so  far  as  he  can  control 
them. 


AND  GOVERNMENT  CONTROL.  209 

ment,  whether  it  be  the  operation  of  a  railway,  or 
the  carriage  of  express  or  mails,  so  economically  or 
effectively  as  by  individual  effort.  The  government 
servant  lacks  in  fertility  of  resource — in  inventive- 
ness. Hired  to  serve,  he  is  superior  to  his  em- 
ployers in  everything  but  energy,  intelligence,  and 
experience.  He  is  a  hard  master  instead  of  a  docile 
creature.  There  are,  of  course,  exceptions.  The 
government  service  has  x^i'oduced  many  men  of 
exalted  wisdom  and  unselfishness,  with  a  genius 
almost  godlike.  It  possesses  many  others  of  lesser 
talent,  who  are  capable  and  ol)liging,  the  equals  of 
the  best.  But  they  do  not  form  any  appreciable 
number  of  the  whole.  The  conditions  are  not  such 
as  to  engender  them. 

Governmental  management  is  nowhere  the  equal 
of  private  effort.  It  is  objectionable,  because  of  the 
excessive  cost  that  attends  its  operation,  because  of 
its  lack  of  facility,  its  lack  of  public  spirit,  its  un- 
approachableness,  the  high  prices  it  engenders.  A 
government  monopoly  is  the  most  objectionable 
monopoly  in  the  world,  because,  however  baneful, 
it  is  superior  to  assault,  because  carried  on  ostensi- 
bly in  the  interest  of  the  public.  It  points  to  its 
performances  as  creditable,  without  the  people  hav- 
ing the  ability  to  judge  by  comparison  whether  they 
are  so  or  not. 

Men  who  are  themselves  failures,  or  who  do  not 
discern  the  certainty  with  which  mankind  achieve 
great  commercial  ends  when  left  to  themselves,  turn 
to  the  government  just  as  a  child  learning  to  walk 
turns  to  its  mother,  with  tears  in  its  eyes,  when  it 

14 


210  RAIL  WA  Y  RA  TE8 

falls.  But  a  wise  mother  does  not,  because  of  this, 
take  up  the  child  and  carry  it.  She  encourages  it 
to  try  again. 

Grovernment  management  of  commercial  affairs  is 
never  expedient,  never  wise,  never  fruitful.  It 
is  unnecessary.  Competitive  effort  may  always  be 
depended  upon  to  i^rotect  a  ]peo]3le  from  the  machi- 
nations of  interested  parties,  if  left  free  in  its  opera- 
tions. But  nothing  can  protect  a  people  from  gov- 
ernment monopoly,  from  the  stuiDidity,  arrogance, 
and  ambitious  ends  of  governmental  servants. 

Those  who  advocate  government  interference  in 
matters  of  business,  do  so  from  selfish  reasons  or 
from  lack  of  knowledge.  To  the  latter,  a  spot  on 
their  spectacles  is  greater  than  the  luminous  sun. 
Personal  injuries,  individual  acts  of  injustice,  are 
greater  to  them  than  the  common  good.  They  see 
in  the  railway  system  an  engine  of  oppression,  be- 
cause some  one  has  been  wronged,  because  some 
one  has  been  dishonest  or  foolish.  They  would  de- 
stroy established  methods  of  the  greatest  good,  be- 
cause, forsooth,  some  one  has  been  ox)X5i'6ssed,  some 
one  has  derived  unfair  advantage  therefrom.  Un- 
happy the  country  where  such  men  are  listened  to. 
They  do  not  look  beyond  speculative  endeavor. 
Their  horizon  is  a  sheet  of  i^aper,  their  object  the 
Utopia  of  the  dreamer.  They  are  unstable  as  water, 
the  prophets  of  the  simple,  discontented,  ungrateful, 
and  vicious  of  society.  * 


*  Among  those  who  advocate  government  ownership  of  raih-oads, 
we  may  also  include  the  owners  of  bankrupt  and  semi-bankrupt  rail- 
roads.    Otiicr  men,  ignorant  of  the  cause,  hail  this  advocacy  as  an 


AND  GOVERNMENT  CONTROL.  211 

Government  ownersliii?  and  management  every- 
where means  the  same  thing:  lax  responsibility, 
great  ontlay.  It  means  the  substitution  of  the 
ox)erative's  convenience  for  the  public  good.  In  the 
management  of  private  corx)orations,  a  deficit  is  a 
serious  matter,  to  be  scrutinized  with  sharpness.  In 
the  oi^eration  of  governments  it  is  only  an  incident, 
to  be  looked  upon  with  patriotic  indulgence. 

The  owners  of  railroads  find  it  difficult  to  super- 
vise their  proiDerties  through  the  managers  they 
emj)loy,  although  constantly  on  the  watch,  although 
one  and  all  are  animated  by  the  fear  of  personal 
loss.  How  much  more  difficult,  then,  must  it  be  for 
the  peox)le  to  do  so,  who  have  neither  direct  interest 
nor  infiuence ! 

Wherever  governmental  management  is» contem- 
plated, it  should  be  preceded  and  attended  by  an 
effective  civil  service;  a  service  founded  upon  fixed- 
ness of  employment,  loyalty,  intelligence,  business 
knowledge,  and  skill  in  the  duties  of  carriers.  It 
must  be  conducted  on  the  same  lines  as  private 
enterprise.     Thus  organized,   it  will  still   lack  in 


omen.  It  is,  however,  simply  the  interested  effort  of  a  seller  ;  the 
voice  of  an  impecunious,  improvident,  or  slothful  man,  who  has 
something  on  his  hands  that  nobody  but  the  government  can  be 
induced  to  buy.  Such  men  will  go  to  any  length  to  attain  their  end. 
I  have  in  mind  a  railway  manager  of  this  kind,  who  not  only  advo- 
cates the  ownership  of  railways  by  the  government,  but,  meanwhile, 
wants  the  latter  to  take  possession  of  railways  that  do  not  observe  tlie 
requirements  of  a  particular  law.  The  pointedness  of  this  last  sug- 
gestion was  rendered  more  apparent  by  the  fact  tliat  an  officer  of  his 
company  was  at  that  time  under  indictment  by  a  grand  jury  for  dis- 
obeying the  statute  in  question. 


212  RAILWAY  BATES 

efficiency,  because  wanting  in  the  supervisory  intelli- 
gence and  interest  of  the  owner.  And  right  here  is 
where  government  control  always  fails.  It  lacks 
the  incentive  of  ownership;  lacks  the  wise  advice 
and  direction  of  j)ractical  business  men,  whose  for- 
tunes and  the  fortunes  of  others  depend  upon  the 
wisdom  of  what  they  do. 

For  these  and  other  reasons,  government  owner- 
shiji  or  management  of  railroads  is  impracticable. 
It  is  especially  so  in  the  United  States.  The  latter 
has  the  most  extended  system  in  the  world,  with  a 
civil  service  the  most  lax.  "  When  our  politics  are 
purified,  so  as  to  exclude  from  them  selfish  ends 
and  improper  means,  it  may  be  j)ossible  to  bring  the 
railways  under  political  control  without  making - 
them  a  source  of  general  corruption."  *  Without 
making'  them  a  source  of  corruption,  yes.  But  we 
can  never  make  such  a  service  as  efficient  or  eco- 
nomical as  one  managed  by  private  enterprise,  be- 
cause constructive  and  administrative  ability  will  be 
kicking. 

Not  only  is  the  government  of  the  United  States 
illy  adapted  to  assume  the  ownership  or  manage- 
ment of  railways,  but  the  railway  system  itself  is 
not  in  a  position  for  so  radical  a  change.  It  must 
work  out  its  own  destiny  in  its  own  way.  "No 
comprehensive  solution  of  the  American  railroad 
problem  need,  however,  now  or  at  any  time,  be 
anticipated  from  the  action  of  the  government.  The 
statesman,  no  matter  how  sagacious  he  may  be,  can 
but  build  with  the  materials  he  finds  ready  for  his 

*J.  F.  Iludsou,  "The  Railways  and  the  Republic,  "  page  337. 


AND  GOVERNMENT  CONTROL.  213 

hand.  He  can  not  call  things  into  existence,  nor 
indeed,  can  he  greatly  hasten  their  growth.  If  he 
is  to  succeed,  he  must  have  the  conditions  necessary 
to  success.  So  far  as  the  railroad  system  of  this 
country  is  concerned,  in  its  relations  to  the  govern- 
ment, everything  is  as  yet  clearly  in  the  formative 
condition.  Nothing  is  ripe.  That  system  is  now, 
with  far  greater  force  and  activity  than  ever  before, 
itself  shaping  all  the  social,  political,  and  economical 
conditions  which  surround  it.  The  final  result  is 
probably  yet  quite  remote,  and  will  be  reached  only 
by  degrees.  When  it  comes,  also,  it  will  assuredly 
work  itself  out;  probably  in  a  very  common^^lace 
way."  * 

But  while  we  may  question  the  utility  of  govern- 
ment ownership  or  control,  we  can  not  doubt  the 
value  of  governmental  supervision,  wisely  and 
honestly  exercised.  No  harm  can  accompany  it; 
it  may  correct  many  misapprehensions,  may  greatly 
allay  public  irritation,  may  prove  a  wise  counselor. 
Wherever  a  demagogical  s]3irit  jirevails,  it  may  in 
this  way  be  silenced,  or  rendered  innocuous;  where 
ignorance  prevails,  it  may  thus  be  enlightened.  The 
responsibility  of  the  office  and  the  gravity  of  the 
situation  will  superinduce  calmness  and  impartiality 
upon  the  part  of  those  who  fill  it.  In  this  simple 
and  practical  way  a  government  will  secure  every 
good  that  could  i^ossibly  flow  from  active  inter- 
ference, while  the  fatal  evils  that  attend  inter- 
meddling with  commercial  affairs  may  be  happily 
avoided. 


*  C.  F.  Adams. 


CHAPTER  XI. 

GOVERNMENT  SUPERVISION  AND  CONTROL  :  ITS  LIMI- 
TATIONS—  THE  VALUE  OF  PRIVATE  OWNERSHIP 
—  FURTHER  REFERENCE  TO  RATES  :  PRINCIPLES 
UNDERLYING  THEM. 

Nations  commercially  great  delegate  to  their  gov- 
ernments only  such  functions  of  a  business  nature 
as  individual  citizens  can  not  be  induced  to  take  up. 
It  has  been  the  same  in  every  age.  Witness  the 
practices  of  Great  Britain  in  our  time.  *  This,  the 
greatest  nation  that  ever  existed,  not  only  accords 
individuals  the  preference  in  every  case,  but  care- 
fully abstains  from  any  interference  with  them 
likely  to  damjoen  their  ardor  or  restrict  their  achieve- 
ments. Its  policy,  moreover,  is  applied  fairly  and 
unreservedly  to  all;  to  railroads  as  well  as  to  pro- 
ducers of  corn  and  iron.  It  respects  the  proj^erty 
rights  of  the  rich,  as  well  as  the  rights  of  the  poor. 

In  some  respects,  the  people  of  the  United  States 
fall  far  short  of  England, 

We  are  much  given  to  loose  talk  about  those  who 
are  rich;  about  those  who  own  railroads,  banks,  and 
other  great  interests.     It  is  a  species  of  hysteria. 


*  "  The  people  of  England,  proud  of  their  commercial  ability  and 
jealous  of  their  commercial  liberties,  spurn  the  idea  of  governmental 
ownership  or  management  of  the  railroads." — Joseph  Nimmo,  Jr. 

(215) 


216  RAIL  WA  Y  RA  7 7.8 

We  do  not  always  stop  to  inquire  whether  the 
j)uri3oses  of  the  rich  are  benelicent  or  not. 

We  love  to  hold  up  to  public  scorn  particular 
instances  of  wrong-doing. 

We  are  much  inclined  to  self -righteousness. 

Many  of  our  laws  discriminate  unjustly  and  op- 
pressively against  corporate  industries. 

We  are  more  than  half  disposed  to  put  the  own- 
ers of  such  properties  in  the  hands  of  the  police  and 
turn  over  their  affairs  to  the  government. 

In  reference  to  railroads,  that  form  of  government 
su^Dervision  that  will  best  serve  to  quiet  the  appre- 
hensions of  the  people,  and  will  least  interfere  with 
the  skill  and  purposes  of  owners  and  managers,  is 
the  best.  It  is  not  a  material  subject,  but  a  senti- 
mental one.  There  is  really  no  need  of  any  super- 
vision whatever.  But,  because  of  public  suspicion 
and  misapjDrehension,  it  is  both  necessary  and 
beneficial. 

Public  opinion  and  association  of  interest  of  car- 
rier and  patron  will  ever  be  sufficient  to  insure  effi- 
ciency and  prevent  injustice.  Of  course,  individual 
acts  of  wrong-doing  will  occur.  But  wherever  one 
of  these  is  prevented  by  government  supervision,  a 
dozen  will  creep  in  under  cover  of  such  interference. 
Government  commissioners  will  be  useful,  so  far  as 
their  talent,  experience,  and  integrity  enable  them 
to  throw  new  light  on  the  subject.  But  they  must 
be  just  and  impartial.  Otherwise  they  will  be  a 
curse  to  a  nation. 

Government  interference,  whether  local  or  gene- 
ral, like  all  extraneous  influences,  must  be  such  as 


AND  GOVERNMENT  CONTROL.  217 

to  invite  tlie  confidence  of  those  it  concerns;  in  the 
case  of  railways,  of  those  who  own  them.  It  must 
be  wisely  exercised.  If  it  is  not,  cai)ital  will  aban- 
don interests  thus  afflicted.  Undue  interference  in 
the  affairs  of  railroads,  however  necessary,  is  harm- 
ful, because  it  lessens  private  interest  by  dividing 
the  responsibility.  It  chills  the  ardor  of  those  to 
whom  we  must  look  in  matters  of  this  kind.  Its 
effect  is  to  retard  improvements,  to  prevent  new 
enterprises,  to  lessen  the  interest  of  owner  and 
manager  in  the  comforts  and  conveniences  of  the 
people.  Government  interference,  unless  exercised 
with  great  moderation,  blasts  every  interest  it 
esjDouses,  every  industry  it  attempts  to  supervise. 
Arbitrary  action  in  business  matters  must  always 
be  circumscribed  by  the  interests  of  surrounding 
industries.  Those  who  own  and  manage  railroads 
have  little  or  no  discretion,  except  in  facilitating 
public  wants  and  in  adjusting  tariffs  to  meet  the 
ever  varying  needs  of  commerce.  They  must  act, 
whether  they  will  or  no.  Any  attempt  upon  their 
I)art  to  evade  the  just  responsibilities  and  duties 
of  their  office,  is  met  with  loss  of  business  and 
merciless  criticism.  They  must  respond  to  every 
n3ed,  quickly  and  effectively.  Business  can  not 
be  carried  on  otherwise.  A  railway  operated  on 
any  other  basis  would  be  so  cumbersome,  so  illy 
adapted  to  the  needs  of  trade,  that  business  would 
quickly  forsake  its  lines.  It  is  no  disparagement  to 
government  officials,  no  reflection  on  their  intelli- 
gence or  interest,  to  say  that  they  cannot  thus 
respond  to  the  needs  of  commerce.     In  everything 


218  BAIL  WA  Y  RA  TES 

they  do  they  must  conform  to  some  law  or  precedent. 
It  is  thus  the  people  protect  themselves  against  those 
who  govern  them.  There  is  no  other  way.  The 
result  is,  the  government  servant  is  disqualified  from 
filling  any  office  requiring  the  exercise  of  discretion— 
any  office  requiring  its  incumbent  to  adapt  himself 
from  day  to  day  to  constantly  changing  needs. 

The  servant  of  a  government  is  like  a  blind  man, 
when  not  governed  by  law  or  precedent.  He  requires 
these  to  substantiate  his  good  name,  to  shield  him 
from  attack.  In  every  situation  and  experience, 
consequently,  he  hedges  himself  about  with  rules 
and  regulations.  The  more  minute  and  exhaustive 
they  are,  the  better.  He  can  not,  if  he  will,  vary 
them  to  meet  practical  needs  or  the  interests  of  in- 
dividual citizens.  He  is  autocratic.  In  guarding  the 
interests  of  the  people,  he  looks  jealously  after  his 
own  prerogatives  and  interests.  The  power  he 
exercises  and  the  general  limitations  of  his  office,  all 
combine  to  make  him  a  prosecutor,  instead  of  a  con- 
servator, of  those  so  unfortunate  as  to  have  relations 
of  a  business  nature  with  him.  The  fault  is  not 
his,  but  that  of  the  system  of  which  he  is  a  part. 

In  considering  the  subject,  three  reasons  may  be 
assigned  for  State  ownership  of  railroads :  (1) 
Avoidance  of  abuses  incident  to  private  manage- 
ment. (2)  Lack  of  i^rivate  enterxDrise.  (3)  Increase 
of  political  influence  of  the  government.* 

Government  ownershi]3  in  the  United  States  and 
Enaiand  is  advocated  for  the  first-named  reason. 


*  A,  T.  Hadley,  "  Railroad  Transportation,"  page  238. 


.  AND  GOVERNMENT  CONTROL.  219 

The  last  two  are,  generally,  the  incentives  else- 
where. In  every  country,  save  England  and  Amer- 
ica, the  State  owns  more  or  less  railroads;  it  is  also 
more  or  less  active  in  oxoerating  them.  But  wher- 
ever State  and  private  management  have  been  pitted 
against  each  other,  the  superior  skill  of  the  latter 
has  been  marked.  In  Germany  and  Belgium,  pri- 
vate comx^etition  was  found  to  be  so  intolerable  that 
the  State  proceeded  to  buy  up  the  private  railroads. 
State  ownershix^  in  Europe  is  simx^ly  another  form 
of  exercising  j)olitical  influence;  another  form  of 
strengthening  the  governing  class. 

Wherever  railroads  have  been  managed  by  the 
State,  it  has  been  sought  to  base  rates  on  cost  of 
I)roioerty  and  operation.  This  was  to  be  expected. 
It  is  in  accordance  with,  the  conservative  instincts 
of  governments,  their  mania  for  uniformity.  They 
have  no  commercial  sense.  Their  operations  are 
either  mechanical  or  theoretical.  In  framing  a 
tariff,  they  x^roceed  in  the  most  direct  way  to  ascer- 
tain the  cost  of  terminal  charges,  exx^ense  of  move- 
ment, interest,  and  taxes,  and  having  done  so,  to 
base  the  rate  thereon.'^  The  result  is  what  might 
be  exx)ected.  Such  a  rate,  while  theoretically  per- 
fect, is  not  practicable  in  actual  operation.  If  x)ro- 
gressive,  it  will  estox)  trading  in  distant  markets, 
while  for  short  distances  the  terminal  charge  will 
be  so  large  as  to  send  business  by  other  conveyances, 
or  xjrohibit  it  entirely. 


*  Thus,  the  rate  in  Germany,  ' '  on  any  class  of  goods,  consisted  of 
a  fixed  charge  to  cover  terminal  expenses,  independent  of  distance, 
plus  a  rate  per  mile  to  cover  movement  expenses." — A.  T.  Hadley. 


220  BAIL  WA  T  BATES 

Rates  based  on  relative  cost  retard  traffic,  except 
within  exceedingly  circumscribed  limits.  This 
theory  falls  to  the  ground  with  actual  practice. 
"There  was  never  a  more  mistaken  idea  than  the 
idea  that  rates  would  be  reduced  if  they  were  based 
upon  cost  of  service.  The  principle  keeps  rates 
uj).  If  it  is  strictly  ax)x>lied,  it  makes  it  necessary 
that  each  item  of  business  should  pay  its  share  of 
the  fixed  charges.  A  great  deal  of  business  which 
would  -paj  much  less  than  its  share  of  the  fixed 
charges  (though  still  giving  a  slight  profit  above 
train  and  station  expenses),  is  thus  lost.  This  is 
bad  for  the  railroads,  bad  for  the  shii)per,  and  bad 
for  the  prospect  of  low  average  rates.  It  makes  the 
business  of  the  roads  so  much  smaller  that  the 
shai'e  of  fixed  charges  which  each  piece  of  business 
has  to  x>ay  (under  this  system),  becomes  higher, 
while  the  profit  does  not  increase,  and  the  induce- 
ment to  new  construction  is  lessened.  These  things 
are  not  mere  theory,  but  are  matters  of  history.  The 
great  reductions  of  rates,  whether  in  tlie  United 
States,  Belgium,  or  elsewhere,  have  taken  place 
under  the  stimulus  of  competition,  even  if  it  was 
only  temjDorary.  They  have  been  made  at  the  very 
periods  when  the  principle  of  basing  rates  upon  cost 
of  service  was  most  systematically  violated.  It  is 
the  countries  which  have  passed  through  such  periods 
that  enjoy  the  lowest  rates."  * 

A  tariff  based  on  cost  is  practically  impossible. 
Wherever  sought  to  be  introduced,  its  use  is  attended 


*  A.  T.  Hadley,  "Railroad  Transportation,"  page  250. 


AND  GOVERNMENT  CONTROL.  221 

with  countless  exceptions,  special  rates,  concessions, 
avoidances,  sliding  scales,  and  other  makeshifts  de- 
signed to  harmonize  it  with  actual  needs ;  to  make 
it  fit  the  wants  of  commerce,  rather  than  the  theories 
of  empires  and  XDoliticians.  Austria,  like  Germany, 
attempted  to  base  rates  on  cost,  but  unsuccessfully. 
The  effort,  however,  was  fertile  with  suggestion. 
Thus,  it  sought  to  make  middle  distance  traffic 
pay  relatively  more  profit  than  the  long  or  short 
distance.  Rates  finally  were  based  on  what  the 
traffic  would  bear,  but  the  government  sought  to 
make  it  appear  as  if  they  were  based  on  cost  of  ser- 
vice.* Governmental -like,  after  deluding  the  j)eo- 
ple  into  the  belief  that  cost  formed  the  j)roper  basis, 
it  avoided  it  in  actual  practice,  without  acknowledg- 
ing the  decex^tion. 

The  belief  that  every  rate  should  bear  its  share  of 
cost  and  interest  is  theoretically  perfect.  Techni- 
cally it  is  right.  Practically  it  is  absurd.  The 
necessities  of  trade  can  not  be  made  to  conform  to 
any  such  cut-and-dried  rule,  to  any  such  political 
delusion  or  prejudice.  It  must  be  handled  for  the 
profit  there  is  in  it.  Traders  understand  this,  and 
act  accordingly.     No  one  else  does  or  can. 

Happy  the  country  whose  commercial  and  indus- 
trial affairs  are  left  to  the  control  of  traders  ;  to  those 
who  alone  are  imbued  with  the  instinct  of  trade,  or 
possess  the  adaptive  talent  to  conform  to  its  needs. 

In  some  respects  the  business  methods  of  Europe 
are  more  straightforward  and  practical  than  ours. 
If  Eurox^eans   do   not  possess  greater   commercial 


A.  T.  Hadley,  "  Railroad  Transportation,"  page  247. 


222  RAILWAY  RATES 

wisdom  than  we,  t-liey  are  more  courageous  in  enforc- 
ing the  ideas  they  have.  Thus,  while  we  ai)preciate 
as  highly  as  they  the  value  of  stable  rates,  of  rates 
that  shall  conform  generally  to  the  laws  of  trade, 
that  shall  be  generally  uniform,  we  deny  carriers  the 
power  to  enforce  them.  We  refuse  even  to  consider 
the  subject,  but  fly  incontinently,  like  children,  be- 
fore the  ignorant  and  demagogical  cry  that  the 
people  are  injured  by  combinations  having  such 
objects  in  view.  The  suggestion  that  they  are 
trusts,  that  they  are  monopolistic,  destroys  the 
courage  of  our  law-makers.  In  other  countries  the 
law-makers  are  less  timid.  They  not  only  recog- 
nize the  necessity  of  carriers  combining,  but  encour- 
age them  to  do  so.  They  have  found  that  where 
railroads  are  in  active  competition,  nothing  can 
I)reserve  the  stability  of  rates  except  granting  them 
permission  to  divide  the  business — to  pool  it,  in  fact. 
European  governments  not  only  recognize  the  neces- 
sity and  equity  of  pools,  but  legalize  and  enforce 
them.  They  carry  them  "  to  an  extent  undreamed 
of  in  America.  They  have  both  traffic  jpools  and 
money  j)ools.  There  are  pools  between  State  roads 
and  private  roads,  between  railroads  and  water 
routes.  It  is  regarded  as  a  perfectly  legal  thing  that 
one  road  should  pay  another  a  stated  sum  of  money, 
in  consideration  of  the  fact  that  the  latter  abstains 
from  competing  for  the  through  traffic  of  the 
former."*     The  experiences  of  European  roads  are 


*  A.  T.  Hadley,  "Railroad  Transportation,"  page  249.  This 
exposition  is  so  grapliic  that  I  can  not  refrain  from  quoting  it  a 
second  time. — M.  M.  K. 


AND  GOVERNMENT  CONTROL.  223 

not  peculiar.  The  needs  of  railroads  are  tlie  same 
everywhere.  They  are  everywhere  governed  by 
natural  laws,  if  left  to  themselves,  and  are  valuable 
to  a  community  in  Just  so  far  as  they  conform  to 
such  laws. 

Government  management  of  railroads  is  never 
based  solely  on  commercial  and  social  requirements, 
but  upon  jjersonal  and  political  needs  as  well.  It  is 
made  ujd  in  about  equal  parts  of  business  and 
I)olitics,  trade  and  theory,  frankness  and  evasion, 
knowledge  and  ignorance,  industry  and  sloth.  A 
country  thus  afflicted  can  not  compete  with  others 
more  favorably  situated  in  the  trade  and  commerce 
of  the  world.     It  is  too  heavily  handicapped. 

Wherever  State  management  has  been  tried,  it  has 
been  found  lacking  in  effectiveness,  in  ability  to  com- 
pete with  private  endeavor.  However,  we  must  not 
look  to  see  governments  generally  acknowledge  this 
fact.  That  would  be  expecting  too  much.  Here, 
as  elsewhere,  self-interest  clouds  men's  intelligence 
quite  as  much  as  their  ambition  disinclines  them  to 
relinquish  power.  Instances  are  not  wanting,  how- 
ever, where  the  shortcomings  of  government  man- 
agement have  been  so  glaring  as  to  compel  recogni- 
tion. This  was  so  in  Italy.  The  case  was  excep- 
tional. The  financial  situation  of  the  country  was 
critical.  The  government  felt  unwilling  to  take  the 
responsibility  longer.  It  accordingly  turned  over 
its  roads  to  private  parties.  In  relinquishing  con- 
trol, it  summed  up  the  case  against  itself  as  fol- 
lows: "It  is  a  mistake  to  expect  lower  rates  or 
better  facilities  from  government  than  from  j^rivate 


224  RAILWAY  BATES 

companies.  The  actual  results  are  just  the  reverse. 
The  State  is  more  apt  to  tax  industry  than  to  foster 
it ;  and  when  it  attempts  to  tax  industry,  it  is  even 
less  responsible  than  a  private  company.  State 
management  is  more  costly  than  private  manage- 
ment. Much  capital  is  thus  wasted.  State  manage- 
ment is  demoralizing,  both  to  legitimate  business 
and  politics."* 

The  Italian  government  did  not  speak  or  act 
hastily.  Its  experiences  had  been  varied  and  ex- 
haustive. "Italy  has  had  more  exi^erience  of  dif- 
ferent methods  of  railway  management  than  any 
other  country  on  the  face  of  the  globe.  It  has  tried 
State  ownership  and  private  ownershij);  it  has  tried 
allotting  a  district  to  a  comjoany,  as  in  France;  and 
it  has  held  an  investigation  into  the  whole  subject 
unparalleled,  both  in  extent  and  minuteness.  It 
has  laid  under  contribution  the  railway  experience 
gathered  in  the  course  of  fifty  years  by  every  nation 
in  the  world. ' '  f  Its  action,  therefore,  was  conclusive, 
so  far  as  the  commercial  needs  and  experiences  of 
Italy  were  concerned.  That  these  were  not  notice- 
ably different  from  those  of  other  countries,  we  know 
from  tlie  analogies  of  trade. 

Government  management  of  railways  is  practiced 
more  or  less  in  many  countries.  Not  because  the 
people  thought  it  the  best  way,  but  because  govern- 
ment aid  was  necessary  in  the  first  instance  to  build 
the  roads. 


*W.  M.  Acworth,   M.  A.,     "The  Railways  and  the  Traders," 
page  164. 
t  Ibid. 


AND  GOVERNMENT  CONTROL.  225 

No  people  who  possess  commercial  sense  and  busi- 
ness shrewdness  accept  government  management  as 
the  best.  It  does  not  solve  a  single  problem  of  busi- 
ness. Directly  the  contrary.  It  is  not  more  selfish, 
perhaps,  than  private  ownership,  but  it  is  less  intelli- 
gent, less  discriminating,  less  sensitive  to  the  neces- 
sity of  co-oi)erative  effort.  Its  power  enables  it  to 
ma.ke  its  selfishness  effective.  It  crowds  out  private 
capital,  stifles  private  enterprise,  prevents  competi- 
tion. It  is  both  greedy  and  narrow.  It  is  the  most 
vicious  and  the  least  amenable  to  reason  of  any 
monopoly  in  the  world,  because  founded  ostensibly 
on  the  ijublic  good. 

In  France,  the  obligations  of  the  railroads  were 
guaranteed  by  the  government;  at  the  expiration  of 
a  hundred  years,  the  ]oroperties  were  to  revert  to  it 
absolutely.  In  locating  the  different  lines,  each  was 
made  a  monopoly,  so  far  as  jpossible.  The  i^rofits 
that  have  attended  their  operation  are  not  due  so 
much  to  successful  management,  to  economical 
construction  and  operation,  as  to  the  absence  of 
healthful  competition.  Their  rates  are  much  higher 
than  those  of  the  United  States,  while  their  service 
is  in  every  way  less  effective.  Government  control, 
here,  as  elsewhere,  is  very  conservative,  i.  e. ,  is  loth 
to  do  anything.  While  extremely  anxious  to  satisfy 
every  expectation,  it  has  made  little  progress.  It  is 
too  prolix,  too  circumstantial,  is  lacking  in  virility, 
inventiveness,  business  skill,  ability  to  adapt  itself 
immediately  to  the  wants  of  the  community.  Its 
operations  are  those  of  a  bureau,  rather  than  those 
of  business  men. 

15 


22C  liAILWAT  HATES 

The  Belgian  system  of  government  railroads  has 
been  esteemed  from  the  first  the  highest  pattern  of 
this  form  of  management.  Its  initiative  was  admir- 
able. It  thundered  loudly  in  the  index,  but  has 
not  kept  up  with  expectation.  Its  ' '  early  arrange- 
ments were  admirable  for  the  time  in  which  they 
were  devised.  But  they  were  not  changed  to  keej) 
pace  with  progress  elsewhere.  The  Belgian  system 
of  reports  and  statistics,  when  first  adopted,  was 
the  best  in  the  world;  a  generation  later  it  was  the 
worst.  In  their  engineering  arrangements,  machine 
shops,  etc.,  what  was  at  first  admirable  j)recision 
soon  became  intolerable  old  fogeyism."  *  However, 
characterizations  of  this  nature  do  not  apply  to  the 
Belgian  system  alone.  They  apply  to  government 
management  everywhere.  Government  officials  are 
the  same  in  their  dispositions  and  methods  in  every 
country.  They  cling  to  that  which  they  know. 
Their  changes  are  mainly  mechanical,  clerical;  the 
adoption  of  new  checks  and  safeguards;  of  new 
designs,  to  keep  the  people  in  order  and  at  a  re- 
spectful distance. 

All  government  service  is  generically  alike  in  its 
disposition  to  multiply  oflices,  to  magnify  details. 
Its  opi)ortunities  afford  no  adequate  incentive  to 
industry;  it  does  not  regard  economy;  the  wages  it 
pays  are  excessive;  its  hours  are  short;  its  vacations 
are  long;  its  supplies  are  bought,  not  with  reference 
to  their  needs,  but  with  a  view  to  stimulate  tastes 
and  industries.     It  is  extravagant.     The  losses  it 

*  A.  T.  Hadley. 


AND  GOVERNMENT  CONTROL.  227 

entails,  however,  are  so  covered  up  and  diffused 
in  the  annual  budget  that  they  are  not  generally 
known  or  appreciated.  The  inefficiency  and  extrav- 
agance of  government  management  is  not  recognized, 
for  lack  of  something  better  to  compare  it  with. 
Every  form  of  government  is  alike  in  its  desire  and 
ability  to  hide  its  shortcomings.  The  exception  to 
this,  so  far  as  we  know,  is  the  case  of  Italy.  But 
the  experiences  of  that  country  were  j)articularly 
disastrous.  One  of  its  provinces,  Lombardy,  found 
it  necessary  at  one  time  to  susjoend  her  freight 
service,  because  of  lack  of  ability  of  those  in  charge 
to  handle  it.  But  this  was  an  extreme  case.  Under 
private  management,  the  roads  of  Lombardy  had 
been  vigorous,  economical,  and  effective. 

Government  interference  in  commercial  affairs  in- 
creases the  influence  of  those  in  power.  This  is  as 
true  of  republics  as  it  is  of  monarchies.  If  the  gov- 
ernment is  not  a  desjDotic  one,  it  is  debased  by  the 
contact.  It  corrupts  the  law-making  power  and 
weakens  the  executive.  Thus,  to  cite  an  instance, 
the  Belgian  government  found  it  necessary,  at  one 
time,  in  order  to  conciliate  a  particular  class,  to 
make  rates  without  reference  to  the  needs  of  busi- 
ness, simply  to  secure  a  jpolitical  end.  The  case  was 
not  j)eculiar.  Under  State  control  ministers,  legis- 
lators, office-holders,  and  judges  become  the  arbiters 
of  trade.  Could  anything  be  more  absurd?  The 
injury  a  country  suffers  from  such  contact  is  not 
alone  pecuniary,  it  is  also  moral.  Not  that  official 
corruption  is  necessarily  implied.  This  may  per- 
haps be  avoided.     But  temj)tation  is  constant  and 


.228  ^^^^  ^-4  y  HA  TES 

extreme.  In  Australia,  Avliere  railroads  are  domi- 
nated by  the  government,  it  is  said  not  to  be  an  un- 
usual occurrence  for  legislators  to  make  investments 
in  a  particular  district,  and  then  proceed  to  obtain 
the  construction  of  a  road  thereto,  either  by  the 
government  or  under  its  bounty. 

It  does  not  require  a  fertile  imagination  to  picture 
the  advantages  corrupt  legislators  may  take  wher- 
ever railroads  are  built  or  oj)erated  by  the  State. 
The  incentive  to  make  such  x^roperties  the  medium 
of  personal  aggrandizement  will  be  constant  and 
irresistible,  but  so  insidious  and  hidden,  so  covered 
up,  by  one  specious  pretence  or  another,  that  the 
acts  of  the  demagogue  and  rogue  can  not  be  distin- 
guished from  those  of  the  upright  legislator. 

The  government  ownership  and  management  of 
railways  in  Australia  has  been  both  curious  and 
instructive.  There  is  little  in  it  to  encourage  those 
who  favor  government  interference  in  such  matters. 
"Construction  of  railroads  in  Australia  failed  as 
a  i)rivate  enterprise.  Then  each  one  of  the  five  col- 
onies took  the  matter  up  sejDarately  as  governmental 
enterprises.  .  .  .  Their  construction  has  been 
a  source  of  grave  charges  of  dishonesty,  and  their 
management  a  subject  of  iDOj^ular  complaint,  es- 
pecially among  the  farmers.  Freight  charges  are 
much  higher  on  the  Australian  railroads  than  on 
our  American  roads.  The  governments  have  been 
obliged  to  place  their  roads  in  the  hands  of  commis- 
sioners, or  'general  managers,'  as  we  would  caU. 
them,  independent  of  parliamentary  control.  So  that 
the  Australian  system  is  really  one  of  quasi-govern- 


AND  GOVERNMENT  CONTROL.  220 

mental  management. ' '  *  While  the  railroads  of  Aus- 
tralia were  located  with  tlie  exi)ress  view  to  avoid 
competition,  they  have  yielded  little  or  no  i)rofit. 
The  experience  of  Cape  Colony,  South  Africa,  has 
been  the  same. 

In  the  management  of  railways,  economy  of  opera- 
tion and  low  rates  usually  go  hand  in  hand.  There 
is  no  cut-and-dried  formula,  like  cost  of  service, 
mileage,  or  value  of  property,  for  determining  the 
rate.  It  is  based  on  the  value  of  the  thing  handled; 
on  the  value  of  the  service.  There  is  no  other  way. 
Arbitrary  rates  ought  not  to  be  i)ossible  under  a 
government,  any  more  than  under  individuals.  A 
government  rate  that  is  too  low  entails  hardship 
through  the  deficiency  it  engenders  in  the  budget ; 
if  too  high,  it  prevents  business. 

No  material  interest  can  be  benefited  by  govern- 
ment management  of  railways.  Every  stable  inter- 
est lies  in  the  contrary  direction.  It  is  only  a 
matter  of  minor  concern  to  a  government,  whether 
the  railways  it  manages  are  operated  economically 
and  efficiently  or  not ;  it  is  everything  to  the  pri- 
vate owner.  Governments  may  shield  themselves 
behind  prerogatives  and  rules  of  procedure  ;  jDrivate 
owners  can  not.  The  interests  of  the  latter  and  those 
to  whom  they  look  for  business  are  identical.  They 
are  compelled,  therefore,  to  foster  the  interests  of 
their  patrons  to  the  utmost.  Herein  lies  their  profit. 
Under  private  management,  every  resource  of  capital 
is  taxed  to  its  utmost  to  attain  mutually  satisfactory 


Joseph  Nimmo,  Jr. 


230  RAIL  WA  T  RA  TES 

results.  Every  economy  is  practiced  that  a  desire 
of  gain  and  an  alert  and  versatile  talent  can 
suggest ;  the  individual  shipper  is  the  unit  of  the 
service  ;  his  complaints  are  heard,  his  wishes  grati- 
fied whenever  possible.  On  the  other  hand,  the 
government  considers  the  patron  only  in  a  general 
way  ;  his  identity  is  lost ;  he  becomes  mixed  up 
with  the  good  of  the  nation  as  a  whole.  Problems 
of  far  greater  political  importance  crowd  him  out, 
and  thus  the  concrete  good  of  a  people  is  frittered 
away  in  the  attainment  of  general  or  governmental 
aims  or  in  the  gratification  of  ideal  dreams. 

Public  management  of  railroads  is  hampered  by 
the  effort  to  adjust  public  needs  to  private  wants  ; 
by  the  fear  that  some  existing  arrangement  may  be 
disturbed  ;  lest  some  one  will  be  injured ;  lest  the 
government  be  misunderstood  ;  lest  it  be  accused  of 
favoritism  or  imj^rox^er  motive.  Thus,  individual 
entei'prise  is  hampered  and  progress  blocked. 

In  the  affairs  of  government,  extraneous  infiuences 
are  ever  quite  as  potent  as  those  immediately  con- 
cerned; j)olitical  ends  as  great  as  material  necessi- 
ties. In  this  spirit,  governments  build  railroads 
without  reference  to  their  needs,  and  oi)erate  them 
without  reference  to  their  profitableness.  .  "All  that 
can  be  said  in  favor  of  government  ownership  or 
control  of  railways  is,  that  it  can  regulate  the 
freight  charges  and  prevent  excessive  rates  that 
would  interfere  with  the  industries  of  the  country. 
Practically,  it  has  no  such  efl'ect.  The  result  of  the 
writer's  experience  and  observation  is  that  the 
highest  railroad  freight    rates    in  the  world    are 


AND  GOVERNMENT  CONTROL.  231 

where  the  railroads  are  either  owned  or  controlled 
by  the  government;  and  the  lowest  rates  are  those 
in  the  United  States,  where  there  is  free  railway 
construction.     ...     If  the  English  freight  rates 
were  in  force  in  Eastern  Tennessee,  the  iron  and  coal 
interest,  that  is  being  so  extensively  worked  under  our 
low  railway  rates,  could  not  exist;  and  in  iDlace  of  the 
busy  mines  and  furnaces,  there  would  be  only  a  few 
farmers  raising  enough  food  for  their  own  sux)port, 
shipping,  perhaps,  a  little  cotton,  for  nothing  else 
could  stand  the  heavy  freight  rates  to  the  seaports. 
In  English  South  Africa,  all  the  railroads  are  owned 
by  the  government,  and  the  evil  effects  of  the  State 
ownership  can  be  readily  seen.     In  order  to  get  the 
necessary  votes  in  the  assembly  to  pass  a  bill  author- 
izing the  construction  of   meritorious  lines,  it  has 
been  necessary  to  build  other  lines  that  were  not  re- 
quired and  will  not  pay.     ...     As  the  govern- 
ment and  railroad  officers  wish  to  make  a  good 
financial  showing,  they  are  obliged  to  charge  high 
freight  rates  on  the  good  lines,  to  make  up  for  the 
loss  on  the  poor  ones.    This  has  caused  such  high 
freight  rates  as  to  be "  nearly  jDrohibitory  to  farm- 
ing, except  near  the  sea-coast.     Diamond  and  gold 
mining,  sheep  and  ostrich  farming,  are  the  only  in- 
dustries developed  in  the  interior  that  can  stand  the 
high  freight  charges.    The  government  will  not  grant 
permission  to   construct  private  lines,  for  fear  of 
competing  with  and  injuring  the  public  lines."  "^ 
The  exi3eriences  of  the  Cape  Colony  are  not  peculiar. 


*  E.  Bates  Dorsey,  at  annual  convention  of  the  American  Society 
of  Civil  Engineers,  May,  1891. 


233  R^^IL  WA  Y  RATES 

Goveruiiient  management  is  the  same  everywhere 
— arbitrary,  contracted,  expensive,  lacking  in  both 
business  acumen  and  adaptability. 

No  commercial  people,  no  peo^^le  fond  of  affairs, 
have  ever  been  benefited  by  government  interfer- 
ence in  business  matters,  least  of  all  with  rail- 
ways. Trade  is  self-adjustive;  conforms  to  its  own 
laws  and  customs.  Governments  are  not  thus 
adaptive.  They  lack  flexibility,  the  desire  to  meet 
the  wants  of  a  community  that  is  born  of  a  love  of 
gain.  Their  management  is  everywhere  attended 
with  the  same  drawbacks— restricted  competition, 
high  rates,  antiquated  machinery,  distrust  of  capi- 
tal, absence  of  j)rivate  endeavor.  Government  man- 
agement of  railroads  is  advocated  as  a  means  of 
redressing  wrongs,  of  preventing  unfair  advantage, 
of  securing  reduced  rates.  It  does  not  accomplish 
any  of  these  things.  "  Whatever  was  bad  before 
it  makes  worse.* 

A  means  of  securing  equitable  rates  is  to  restrict 
the  i^rofits  of  owners;  to  determine  in  advance  the 
maximum  amount  they  shall  receive  in  the  shape  of 
interest  and  dividends.  The  i)urpose  is  not  objec- 
tionable in  itself,  but  commendable.  But,  like  all 
interference  with  economic  laws,  its  results  are  not 
what  we  expect.  Far  from  it.  Money  thus  di- 
verted does  not  revert  to  the  community  in  the 


*  The  highest  good  that  can  attach  to  government  intervention  in 
a  country  whose  people  possess  commercial  spirit  or  enterprise,  is  to 
be  found  in  a  merely  supervisory  body,  sucli  as  the  Board  of  Trade 
of  Great  Britain,  or  the  Interstate  Commerce  Commission  of  the 
United  States. 


AND  GOVERNMENT  CONTROL.  233 

shape  of  reduced  rates,  but  is  wasted  in  extrava- 
gances; in  undue  multiplication  of  enix)loyes,  in 
excessive  wages,  in  costly  improvements,  in  luxuri- 
ous ax)pointments.  Every  dollar  thus  withheld 
from  the  owners  of  a  property  is  frittered  away  in 
unnecessary  improvements,  or  divided  up  among 
employes,  or  those  who  furnish  supplies.  The  sur- 
plus of  a  railway  adjusts  itself  naturally,  whether 
much  or  little.  The  attem^it  to  limit  it  is  senti- 
mental; is  not  based  on  correct  principles  or  good 
sense.  The  owner  should  be  encouraged  to  earn  all 
he  can.  He  will  thus  be  led  to  economize,  to  operate 
prudently.  Every  dollar  he  gets  we  may  be  assured 
he  will  use  wisely — will  wisely  re-invest.  Every 
dollar  im]3roperly  withheld  from  him,  we  may  be 
sure  will  be  wasted.  An  official  for  many  years 
connected  with  the  government  of  England,  refer- 
ring to  this  subject,  says:*  "  The  principle  of  limi- 
tation of  dividend  is  in  itself  faulty.  So  long  as  the 
charge  is  not  too  high,  the  public  have  no  interest 
in  the  reduction  of  dividend.  Their  interest  is  in 
the  reduction  of  price,  which  is  a  totally  different 
thing.  The  fallacy  lies  in  supiDosing  that  what  is 
taken  from  the  shareholders  necessarily  goes  into 
the  pocket  of  the  consumer.  It  does  no  such  thing; 
it  is  probably  wasted  in  extravagances,  which  the 
company  have  no  motive  whatever  in  reducing. 
Indeed,  one  of  the  worst  consequences  of  the  system 
is,  that  it  takes  away  inducements  to  economy.  It 
leads  not  only  to  extravagance  in  current  expenses, 


*  Sir  Thomas  Fairer, 


234  BAIL  WAT  BATES 

but  to  an  extravagant  waste  of  Ctii:)ital.  In  fact,  in 
this  parliamentary  limitation  of  dividend  and  cai)i- 
tal,  we  have  gone  on  a  perfectly  wrong  track,  and 
have  involved  ourselves  in  a  maze  of  absurdities." 

Much  dissatisfaction,  at  one  time  and  another,  has 
been  expressed,  both  at  home  and  abroad,  in  re- 
gard to  the  management  of  the  railroads  of  the 
United  States.  Many  of  the  criticisms  have  been 
justified.  But  the  fact  remains  that  the  manage- 
ment of  these  roads  has  been  the  most  effective  in 
the  world;  they  have  been  prudently  constructed 
and  economically  worked  ;  the  rates  they  charge  are 
abnormally  low ;  their  service  reasonably  safe  and 
effective.  This  is  now  generally  recognized.  Reduc- 
tions in  rates  have  gone  hand  in  hand  with  economi- 
zations  in  construction  and  operation.  Similar  con- 
ditions do  not  attend  arbitrary  reductions  in  rates ; 
they  manifest  themselves  in  fewer  and  slower  trains, 
in  poorly  maintained  properties,  in  lack  of  general 
interest  and  concern.  Americans  do  not  want  low 
rates  on  such  terms.  Their  commercial  prosperity 
and  supremacy  depend,  not  in  curtailing  facilities, 
but  in  constantly  increasing  them.  These  are  to  be 
obtained,  not  by  harassing  the  owners  of  railroads, 
but  by  protecting  and  encouraging  them.  They 
have  given  us  the  lowest  rates  in  the  world.  If  left 
unhami)ered,  we  may  be  assured  that  they  will  fur- 
ther reduce  them  as  opportunity  offers.  Nothing  is 
to  be  gained  by  interference.  Directly  the  contrary. 
Tlie  owners  of  railroads  do  not  need  any  such  spur. 

In  no  instance  has  State  ownership  of  railroads 
answered  the  expectation  of  those  who  advocated  it 


AND  GOVERNMENT  CONTROL.  235 

from  a  belief  tliat  rates  would  be  cheapened  and 
facilities  bettered  thereby.  But  nowhere,  it  is  prob- 
able, has  j)ublic  expectation  been  so  grievously  dis- 
appointed in  this  respect  as  in  Grermany :  that  coun- 
try of  exact  ways,  honest  methods,  and,  compara- 
tively, efficient  public  service.  The  German  advo- 
cates of  government  ownership  believed  that  the  State 
would  oj)erate  railways  for  the  general  good,  that 
there  would  be  low  tariffs  and  better  service.  This 
expectation  has  not  been  realized.  The  State,  because 
of  the  increasing  financial  importance  of  its  railways, 
has  gradually  come  to  look  upon  them  as  a  source 
of  power  and  revenue,  not  as  public  institutions  that 
should  be  administered  so  as  to  lessen  the  cost  as 
much  as  possible  of  everything  to  the  community. 
It  is  found  that  the  State  is  quite  as  greedy  as 
private  owners  were,  while  it  is  less  economical  and 
efficient ;  lacks  the  administrative  genius  they  pos- 
sessed. Its  j)ower  enables  it  to  defy  j)ublic  oj^inion, 
to  refuse  reductions  of  rates,  to  refuse  facilities  that 
are  needed,  to  refuse  to  keep  pace  with  the  me- 
chanical appliances  of  roads  elsewhere.  Frequent 
accidents  make  it  apparent  that  no  added  security 
has  been  attained  in  this  direction,  while  lack  of 
facilities  manifests  a  want  of  comprehension  of  the 
needs  of  trade  that  is  distressing.  For  these  reasons, 
State  ownership  in  Germany  has,  from  the  stand- 
point of  the  people,  proven  a  burden.  From  the 
government  standpoint,  however,  it  is  esteemed  a 
success,  because  it  has  added  greatly  to  the  power  of 
the  government.* 


*  I  gleau  these   facts  in  regard  to  German  railroads  from  Die 
Nation,  of  July  35,  1891. 


236  RAIL  WA  T  BA  TE8. 

The  question  of  governmeut  ownership  and  man- 
agement of  railroads  has  not  been  much  discussed 
in  the  United  States.  There  seems  to  be  a  tacit 
understanding  among  practical  men  that  it  would 
not  be  desirable.  The  government  itself  has  stu- 
diously discouraged  such  reference.* 


*  Government  ownership  of  railways  lias  been  tried  in  a  limited 
way  in  the  United  States.  Fifty  years  ago  the  State  of  Illinois 
constructed  a  road  at  a  cost  of  one  million  dollars,  but  disposed 
of  it  later  for  one  hundred  thousand  dollars.  Indiana  had  a  similar 
experience.  Georgia  owns  a  railroad,  but  has  found  it  expedient  to 
lease  it  to  private  persons.  Pennsylvania  constructed  a  railroad  from 
Philadelphia  to  Columbia,  but  subsequently  sold  it,  for  the  reason 
that  the  commonwealth,  on  reflection,  believed  that  transportation  was 
to  be  regarded  as  a  private  enterprise,  and  not  as  a  public  function. 
Massachusetts  acquired  the  Troy  and  Greenfield  line,  but  found  it 
expedient  to  part  with  it.  Michigan,  in  its  early  histoiy,  constructed 
and  operated  railroads,  but  within  a  decade  found  it  advisable  to 
dispose  of  them,  and  the  people  of  that  State,  by  provision  of  their 
constitution,  subsequently  forbade  the  State  from  participation  in 
such  work. 


CHAPTEE   XII. 

GOVERNMENTAL   CONTROL  VERSUS  PRIVATE  CONTROL 

—  WHEN   GOVERNMENT   CONTROL   IS    DESIRABLE 

—  WHEN   UNDESIRABLE  —  ITS  TENDENCIES. 

Amoncj  other  reasons  assigned  why  governments 
should  own  and  operate  railroads,  and  one  much 
ax)plauded,  is  that  it  will  take  them  out  of  the 
hands  of  rich  men;  that  the  latter  already  are  too 
powerful.  This  is  very  much  like  advising  the 
people  on  board  a  ship  to  throw  the  pilot  overboard, 
because  of  his  i;)rominence  and  the  X3rerogatives  he 
exercises.  The  rich  men,  including  the  honestly- 
striving-to-be-rich,  are  the  commercial  pilots  of  a 
nation,  sagacious,  x)i"ogi'essive,  and  conservative. 
They  are  not  only  its  safest  advisers,  but  the  only 
ones  who  have  ability  to  forecast  the  future.  They 
alone  have  surjDlus  caj^ital  to  invest  or  the  courage 
to  make  new  improvements.  A  nation  without  such 
men  to  advise  and  lead,  is  like  a  school  without  a 
teacher.  They  rei^resent  its  accumulated  experience 
and  wisdom.  They  alone  know  how  to  make  money, 
how  to  preserve  it,  how  to  invest  it.  They  are  the 
storehouse  of  a  nation,  the  reservoir  from  which  the 
stream  that  animates  its  industries  flows. 

If  I  were  asked  when  government  ownership  and 
management  of  railways  would  be  advisable,  I  should 
reply,  when  the  self-interest  and  experience  of  indi- 

(2.37) 


238  RAIL  WA  Y  RA  TE8 

viduals  cease  to  be  safe  guides  for  men  to  follow  in 
commercial  matters.  Government  control  can  never 
be  justified  on  the  ground  of  the  greatest  good  to  the 
greatest  number,  from  the  standj^oint  of  effective 
and  economical  management,  or  material  i)rosperity. 
Government  control  is  advisable  when  private  prop- 
erty is  not  accorded  protection;  when  the  spirit  of 
a  nation  is  agrarian;  when  it  does  not  afford  jus- 
tice and  fair  treatment  to  the  owners  of  railroads. 
Then,  undoubtedly,  State  ownership  is  preferable. 
Security  in  such  a  country  is,  at  best,  precarious. 
Mob  rule,  if  not  present,  is  near.  Under  such  cir- 
cumstances, i)roperty  is  safer  (if  anything  can  be 
safe),  under  governmental  supervision  and  control 
than  under  i^rivate  management.  In  a  country 
thus  cursed,  the  owners  of  railroads  should  sell  to 
the  State,  lest  their  whole  investment  be  confiscated. 
Let  them  make  the  best  terms  they  can,  and  with  the 
proceeds  seek  a  more  favored  land.  Neither  per- 
sonal liberty  nor  property  can  long  be  safe  in  such  a 
country.  The  subversion  of  both  is  only  a  question 
of  time. 

In  a  country,  however,  blessed  with  equitable 
laws  and  a  law-abiding  people,  no  government  organ- 
ization that  we  can  conceive  of,  no  matter  how  per- 
fect, will  ever  prove  a  fit  substitute  for  the  manage- 
ment of  an  active  and  alert  i)eoi)le.  This  is  true, 
both  of  railways  and  other  property. 

The  practices  of  countries  differ,  as  I  have  shown, 
in  regard  to  railroads.  In  England  the  lines  are 
owned  by  private  i^arties.  And  while  the  govern- 
ment service  is  as  good  as  any  in  the  world,  at  once 


AND  GOVERNMENT  CONTROL.  230 

trustworthy,  conservative,  and  wise,  the  people  have 
not  encouraged  it  to  acquire  control  of  railroads  or 
to  actively  interfere.  The  question  has  been  much 
discussed,  but  always  with  the  same  result,  namely, 
that  j)rivate  management  was  best.  Such  a  result 
we  might  expect  from  so  progressive  a  x)eople.  On 
the  continent  of  Europe,  public  and  x)rivate  manage- 
ment exist  side  by  side.  In  some  cases  the  govern- 
ment has  leased  its  lines  to  private  parties;  in  others 
it  operates  them  itself. 

Lack  of  similarity  between  railroads  prevents 
accurate  comi^arison  of  the  results  of  State  control 
and  private  management.  Under  some  circum- 
stances it  seems  favorable  to  the  former,  under 
others  unfavorable;  thus,  expenses  of  administration 
of  traffic  will  be  less  in  one  instance,  while  they  will 
be  more  for  maintenance  in  another.  Such  differ- 
ences determine  nothing,  unless  the  conditions  that 
attend  the  oxieration  of  different  prox)erties  are  alike, 
and  this  we  know  they  are  not.  In  France,  the  rail- 
roads operated  by  the  State  are  generally  branch 
lines,  while  private  parties  manage  the  trunk  lines. 
The  conditions,  therefore,  are  unfavorable  for  the 
State,  and  favorable  for  private  management.  In 
Germany  it  is  the  reverse  of  this.  Italy,  after 
attempting  to  manage  her  railroads,  as  I  have 
shown,  has  withdrawn  from  the  business,  leasing 
them  to  private  parties.  Generally  speaking,  the 
governments  of  Europe  are  excex)tionally  situated 
for  conducting  affairs  of  this  nature.  Their  civil 
service  is  the  best  in  the  world.  It  is  based  on 
fitness.     It  is  lifelong.     Politics  has  nothing  to  do 


240  BAIL  WAT  BATES 

with  appointments  or  dismissals.  Faithfulness  and 
capacity  are  the  governing  forces.  It  lacks,  how- 
ever, the  instinct  of  trade  that  those  engaged  in 
commercial  affairs  should  possess.  This  is  its  weak- 
ness. It  lacks  the  advice  and  directing  force  given 
by  the  owner  in  the  case  of  private  management. 
It  lacks  his  genius  for  business.  No  amount  of 
mechanical  skill  can  compensate  for  this  loss.  It  is 
irreparable. 

In  France,  in  consideration  of  certain  guarantees 
and  favors,  it  was  originally  agreed  that  the  rail- 
roads should  revert  to  the  State  at  tlie  expiration  of 
one  hundred  years.  The  agreement  was  that  the 
reversion  should  be  without  cost.  But  it  was 
expected  that  the  sinking  funds  that  would  be  laid 
aside  by  the  comx^anies,  meanwhile,  would  be  suffi- 
cient to  X3ay  off  their  capital.  The  money  for  these 
sinking  funds  was  not  to  be  furnished  by  those  who 
leased  the  property,  of  course.  It  was  to  be  added 
to  rates  during  the  ninety-nine  years.  It  was  thus 
to  come  out  of  the  nation.  Superficially  viewed, 
the  transaction  seemed  very  favorable  to  the  State, 
but  it  was  not  so  in  fact.  The  State  was  required 
to  j)ay  for  all  it  got  with  usury.  The  people  of  this 
century  were  to  pay  for  those  of  the  next. 

Comx)anies  operated  under  a  limited  tenure  are 
not  so  favorably  situated  as  if  the  tenure  were  per- 
petual. Their  interest  is  always  a  qualified  one,  and 
they  can  not  be  expected  to  maintain  the  proj^erty 
at  a  high  standard  as  the  expiration  of  the  lease 
draws  near.  Thus  the  owner  gains  nothing,  while 
he  loses  the  interest  and  skill  that  attach  to  pro- 


AND  GOVERNMENT  CONTROL.  241 

l^rietorship.  The  total  cost  of  the  French  roads, 
it  is  ax3parent,  was  to  be  added  to  the  expense  of 
oiDerating,  during  the  one  hundred  years  of  the 
lease,  in  order  to  recoujD  those  who  furnished  the 
money  to  buikl  them.  Such  a  burden  could  not  but 
prove  a  great  hardship  to  the  nation,  rendering  it 
difficult,  if  not  impossible,  for  it  to  compete  with 
countries  not  thus  handicapped. 

The  question  of  government  supervision  of  rail- 
roads has  been  a  subject  of  discussion  ever  since 
the  first  line  was  built.  It  has,  however,  few  advo- 
cates in  England  or  America.  Men  are  too  wise, 
too  practical.  They  love,  however,  to  coquette  with 
the  subject,  to  speculate  upon  it.  But  they  show 
no  disposition  to  embrace  it.  The  risk  is  too  great; 
too  appalling.  "It  is  not  a  question  to  be  decided 
by  an  epigram  or  an  analogy.  It  is  a  curious  and 
intricate  question,  I  might  say,  with  more  than  two 
sides  to  it."* 

One  of  the  strongest  reasons  given  for  govern- 
ment ownership,  is  that  the  State  can  borrow  money 
to  build  railroads  at  a  less  rate  than  private  parties. 
This  is,  undoubtedly,  true  in  the  majority  of  cases. 
But  whether  it  would  remain  true  or  not,  if  govern- 
ments undertook  to  discharge  great  affairs  of  busi- 
ness, is  doubtful.  Their  credit  is  good,  simply  be- 
cause their  transactions  are  limited  and  their  re- 
sources great. 

The  greatest  disadvantage,  in  my  judgment,  that 
attends  State  control  of  railroads  is  the  loss  of  the 


*  Edward  Everett  Hale. 
16 


242  RAILWAY  RATES 

experience,  interest,  and  skill  of  the  private  owner. 
No  advantage  can  compensate  for  this  loss. 

In  the  case  of  State  ownership,  money  raised  to 
build  railroads  should  not  be  merged  Avith  the  gen- 
eral indebtedness  of  a  nation.  Such  burdens  should 
be  borne  by  the  districts  benefited,  and  not  by  the 
general  public.  The  interest  on  the  cost  of  every 
railroad  should  be  met  by  the  district  immediately 
benefited;  also  any  attendant  losses.  In  the  case  of 
government  control,  as  in  the  case  of  private  man- 
agement, proj)erties  must  be  o^Derated  with  a  view, 
not  only  to  x^aying  expenses,  but  interest  on  cost. 
Their  affairs  can  not  be  bulked  with  other  concerns. 
In  no  other  way  can  we  determine  whether  a  prop- 
erty is  managed  efficiently  or  not.  Such  separation 
is  absolutely  necessary  to  effective  supervision. 
Without  it,  the  grossest  extravagance  may  charac- 
terize a  management  without  the  fact  ever  being 
known. 

The  success  of  governments  in  handling  mails  and 
other  limited  enterprises,  has  been  cited  as  an  evi- 
dence of  their  ability  to  handle  railroads  success- 
fully. The  comparison  is  hardly  fair.  Handling 
the  mails  is  largely  mechanical,  while  the  other  re- 
quires active  and  harmonious  cooj)eration  with 
mankind  in  all  its  commercial  ventures  and  journey- 
ings.  The  administration  of  the  post  office  by  the 
government  of  the  United  States  has  not  been  finan- 
cially successful.  Enormous  deficits  have  character- 
ized its  management  in  every  stage.  Its  failure, 
moreover,  would  have  been  much  greater,  would 
have    been    still   more    apparent,   except    for    the 


AND  GOVERNMENT  CONTROL.  243 

enforced  aid  it  has  received  from  private  citizens. 
It  has  never  hesitated  to  claim  cooperation  and 
assistance  at  its  own  price  ;  to  bully  when  it  could 
not  coax.  Private  capital  and  enterprise  have 
provided  the  railroads  and  the  trains  in  which  the 
mails  are  carried,  while  a  hard  and  fast  leveling 
statute  has  determined  the  comx^ensation  that  the 
railroad  companies  should  receive  for  performing 
the  service,  '^  The  sx)irit  shown  by  the  government, 
in  recompensing  the  railroads  for  carrying  the  mails, 
has  been  that  of  master  to  slave. 

There  is  no  doubt  but  that  the  mails  could  to-day 
be  handled  more  effectively  and  economically  by 
private  carriers  than  by  the  State,  Cooperation  is 
all  that  is  required.  Excuse  for  government  inter- 
vention no  longer  exists.  When  the  mail  service 
was  inaugurated,  there  was  no  transj)ortation  sys- 
tem. The  government  had  to  provide  it.  Now 
we  have  one  at  once  effective,  economical,  and 
trustworthy.  However,  it  is  not  probable  that  any 
change  will  be  made.  It  is  doubtful  if  a  change 
would  be  wise. 

Government  control  of  great  affairs,  including 
railroads,  is  necessary  and  i^roper  among  a  non- 
commercial people,  like  those  of  India.  But  the 
government  should  look  forward  to  the  day  when  it 
may  safely  relinquish  control,  encouraging  its  peo- 
ple, meanwhile,  to  fit  themselves  for  such  duties. 
Among  a  people  who  possess  ingenuity,  enthusi- 
asm, executive  talent,  business  capacity,  ability  to 


*  Joseph  Niramo,  Jr. 


244  RAILWAY  MATES 

manage,  government  control  is  degrading.  It  not 
only  lacks  in  effectiveness,  but  teaches  people  to  be 
dei)endent,  timid,  lacking  in  courage  and  commercial 
enterprise. 

It  has  been  claimed  that  government  ability  to 
manage  railroads  with  reasonable  success  has  been 
demonstrated  in  the  United  States,  in  the  adminis- 
tration of  receiverships  appointed  by  the  courts,  and 
acting  under  their  jurisdiction.  Such  cases,  how- 
ever, prove  nothing.  They  are  fallacious  and  mis- 
leading. In  the  majority  of  instances,  the  receivers 
know  little  or  nothing  about  the  x^ractical  operation 
of  railways.  They  are  frequently  lawyers,  more 
often  i^oliticians.  They  are  merely  fiduciary  agents 
of  the  court — its  representatives.  The  active  man- 
agement is  entrusted  to  practical  railroad  men,  who 
conduct  the  business  as  in  other  cases.  Properties 
thus  administered  occupy  a  unique  i^osition,  one 
exceedingly  favorable  for  the  manager.  They  have 
practically  no  creditors,  no  stockholders,  no  bond- 
holders; there  are  no  charges  to  i)rovide  for,  exce^^t 
such  as  the  court  designates.  They  are  thus  freed 
from  embarrassing  circumstances,  from  local  har- 
assments  and  agreements,  from  past  obligations. 
The  situation  is  excejptional,  and  such  as  to  suggest 
exceptional  results.  Only  normal  results,  are,  how- 
ever, attained,  and  these  would  not  be  prolonged  if 
the  situation  were  continued  indefinitely,  or  the 
arbitrary  power  of  the  court,  which  respects  neither 
persons  nor  obligations,  were  withdrawn.  The  gov- 
ernment, here  as  elsewhere,  is  bent  on  having  its 
own  way;  on  achieving  results  favorable  to  itself,  no 


AND  GOVERNMENT  CONTROL.  245 

matter  who  suffers  or  how  greatly  material  interests 
are  cripxDled.* 

Notwithstanding  the  phenomenal  achievements  of 
railway  administration  in  the  United  States,  the  fact 
has  not  generally  been  recognized.  It  has  been 
everywhere  assailed  as  corrupt,  untrustworthy,  ex- 
travagant, disregardf ul  of  every  interest  but  its  own. 
Prof.  R.  T.  Ely  accuses  it  of  being  unscientific,  un- 
business-like,  wasteful;  comprising  one-eighth  of 
the  aggregate  property  of  the  country,  he  sees,  in  its 
parallel  lines  and  active  competition,  a  perpetual 
drain  on  the  labor,  land,  and  capital  of  the  country.f 
All  this,  he  thinks,  might  have  been  avoided  by  har- 
monious, unified  management  of  all  parts  acting  as 
a  whole;  such  measures,  moreover,  would,  he  be- 
lieves, have  given  us  a  rational  and  economic  sys- 
tem. Moreover,  lie  sees  in  the  situation  of  railroads 
a  necessity  of  their  seeking  political  power  for  private 
ends  !  a  necessity  for  defrauding  thousands  of  people 


*  The  late  Justice  Miller  thus  spoke  of  the  receivers  of 
railroads:  "  The  appointment  of  receivers,  as  well  as  the  powers 
conferred  on  them,  and  the  duration  of  their  office,  has  made  a 
progress  which,  since  it  is  wholly  the  work  of  courts  of  chancery 
and  not  of  legislatures,  may  well  suggest  a  pause  for  consideration. 
The  receiver  generally  takes  the  property  out  of  the  hands  of  its 
owner,  operates  the  road  in  his  own  way,  with  an  occasional  sugges- 
tion from  the  court,  which  he  recognizes  as  a  sort  of  partner  in  the 
business;  sometimes,  though  very  rarely,  pays  some  money  on  the 
debts  of  the  corporation,  but  quite  as  often  adds  to  them,  and 
injures  prior  creditors  by  creating  a  new  and  superior  lien  on  the 
property  pledged  to  them." — 104  U.  S.  137. 

f  The  improvement  of  the  service,  the  cheapened  devices  and  low 
rates  that  we  owe  to  the  competition  and  strife  of  carriers,  the 
Professor  does  not  see  at  all. 


24G  BAIL  WAY  BATES 

of  their  proi)erty ! !  an  opportunity  and  excuse  for 
owners  and  managers  x^roving  unfaithful  to  their 
trusts  ! ! !  On  the  other  hand,  he  sees  in  government 
ownership  and  management  an  oi)portunity  for  mak- 
ing many  improvements.  Under  its  benign  influence, 
the  morals  of  railway  administration  would  be  puri- 
fied, through  the  publicity  that  government  ownershij) 
entails;  politeness  would  take  the  jjlace  of  brusque- 
ness  on  the  part  of  ofiicials;  greater  care  for  human 
life  would  be  observed,  and  diminution  in  the  cost 
of  operation  would  be  brought  about.  He  also  be- 
lieves that  the  effect  would  be  to  elevate  the  civil 
service  of  the  government,  as  private  corporations 
would  no  longer  be  able  to  attract  to  their  service 
the  business  talent  of  the  land. 

Observe  his  last  reason.  It  is  a  tacit  admission  of 
the  great  talent  of  those  who  manage  our  railroads. 
He  wishes  to  see  those  managers  in  the  service  of 
the  government.  But  in  wishing  this,  he  forgets 
that  their  impulse  and  inspiration  are  derived  from 
those  who  employ  them;  from  the  owners  of  the 
l^roperty.  In  the  service  of  the  government,  they 
would  not  be  different  from  other  government  serv- 
ants. Public  writers  and  advocates  generally  over- 
look this  fact.  The  genius  of  i  he  railroad  manager 
lies  in  those  who  employ  him;  in  those  who  build 
and  own  the  properties;  in  the  commercial  leaders 
and  rulers  who  direct  him. 

As  regards  the  morals  of  railway  administration, 
it  is  probable  they  will  compare  favorably  with 
those  of  our  political  administrations.  As  for  the 
politeness  of  government  officials,  we  need  not  dwell 


AND  GOVERNMENT  CONTROL.  ;i47 

on  that.  If  railway  employes  are  sometimes  lacking 
in  ]3oliteness,  the  fault  is  not  general.  Every  owner 
is  interested  in  correcting  such  an  evil;  it  injures 
his  XDroperty  and  lessens  his  income  by  driving  trade 
from  his  line.  The  government  has  no  such  incen- 
tive. That  greater  care  for  human  life  would  attend 
governmental  management  of  railroads,  it  is  not 
reasonable  to  believe.  Private  owners  are  not  less 
amenable  to  the  dictates  of  humanity  than  govern- 
ment officials,  while  they  have  the  added  incentive 
that  attaches  to  direct  i^ersonal  loss  in  such  cases. 
They  are  affected,  moreover,  by  the  odium  that 
attaches  to  railroads  known  to  be  disregardful  of 
the  safety  of  projierty  and  persons.  That  diminu- 
tion of  cost  of  operation  would  be  brought  about 
by  government  intervention,  is  so  improbable  as  not 
to  merit  argument.  In  reference  to  the  desirability 
of  improving  the  service,  to  deny  its  need  is  to  deny 
the  law  of  progress  of  which  railways  are  the 
greatest  exponents.  But  that  such  improvement 
would  be  facilitated  by  government  management,  is 
contrary  to  all  the  teachings  of  experience  and  the 
legitimate  conclusions  of  every  established  i)rinciple 
I  have  laid  down. 

Peril ax)s  the  most  strenuous  argument  advanced 
by  those  who  favor  government  ownership,  is  that 
it  would  lessen  the  cost  of  operating  railroads;  that 
many  expenses,  now  du^^licated,  would  be  avoided 
thereby.  Particular  items  of  expense  might  be 
lessened,  it  is  j)ossible,  but,  as  a  rule,  the  time  of 
every  man  now  employed  by  railroads  is  fully  occu- 
pied, and  the  work  he  performs  would  not  be  dis- 


248  RAILWAY  MATES 

pensed  with  or  lessened  by  government  ownership. 
Station  and  office  needs  would  not  be  less  tlian  they 
are  to-day.  Room  must  be  had  for  clerks,  super- 
vising officials,  and  the  movement  of  traffic.  No  re- 
duction would  be  i)racticable  here.  More  men  are  not 
now  employed  by  railroads  than  would  be  needed  if 
the  government  operated  them.  The  forces  engaged 
in  handling  traffic  and  su^^ervising  and  managing 
could  not  be  sensibly  lessened,  if  efficiency  was  main- 
tained. There  is  a  limit  to  man's  ability,  and  the 
consolidation  of  railways  into  a  few  great  corpora- 
tions has  reached  that  limit  for  the  present.  There 
is  to  day,  practically,  no  duplication  of  labor  occa- 
sioned by  the  separate  operation  of  railways.  Each 
man  has  his  work  to  perform,  which  would  scarcely 
be  less  if  railways  were  consolidated.  On  the  other 
hand,  government  ownershij)  would  add  greatly  to 
expenses,  because  the  methods  of  governments  are 
much  more  elaborate  than  those  of  individuals. 
Each  office  is  tied  down  with  innumerable  rules  and 
regulations,  which  only  the  department  chief  can 
change.  The  number  of  hours  government  employes 
work  is  generally  less  than  that  of  private  corpora- 
tions, while  their  zeal  is  not  nearly  so  great.  They 
lack  the  inspiration  imparted  by  the  owner  in  the 
case  of  private  companies  The  difference  that  this 
implies,  is  the  difference  between  managing  for  one' s 
self  and  for  another.  It  is  the  difference  between 
genius  and  mediocrity.  Moreover,  under  such  cir- 
cumstances, a  government  seeks  constantly,  through 
artificial  measures,  to  counteract  natural  advantages. 
In  the  operation  of  railroads,  it  would  strive  to 


AND  GOVERNMENT  CONTROL.  249 

stimulate  languishing  industries  and  trade  centers 
by  artificial  processes;  to  i)ut  them  on  an  equality 
with  those  more  wisely  managed  or  located.  Its 
efforts  would  ever  be  directed  to  correcting  the  in- 
equalities of  nature,  to  remedying  the  handiwork  of 
the  Creator,  to  making  the  imj)rovident  man  equal 
to  the  provident  man.  In  doing  this,  it  would  not 
build  up  the  weak,  but  pull  down  the  strong.  The 
burden  of  such  endeavors,  and  the  losses  they 
engender,  are  borne  by  the  country  at  large.  That 
they  greatly  retard  its  progress,  there  can  be  no 
doubt.  We  can  only  restrict  them  by  restricting 
the  cause. 

Aside  from  these  objections  to  government  con- 
trol, however,  there  are  others  of  a  personal  nature. 
The  railway  service,  instead  of  being  amenable 
to  the  public,  instead  of  being  the  creature  and 
the  slave  of  public  need,  would  become  autocratic, 
dictatorial,  and  distasteful;  would  become  its  master. 
Mr.  Chauncey  M.  Depew,  referring  to  this  feature  of 
the  case  in  his  descri^Dtion  of  German  railways,  says  : 
"To  form  any  adequate  idea  of  the  autocratic  man- 
ner in  which  the  railways  of  continental  Europe 
under  government  control  are  managed,  it  is  neces- 
sary to  personally  observe  the  methods  of  their 
administration.  To  illustrate  the  character  of  this 
autocracy,  I  will  relate  an  incident  which  I  know  to 
be  authentic.  A  jjarty  of  American  students,  travel- 
ing through  Germany,  reached  a  raihvay  station  in 
one  of  the  large  cities  Just  as  their  train  was  pull- 
ing out.  An  official,  seeing  that  they  had  started  to 
run  after  the  retreating  train  with  the  evident  inten- 


350  RAILWAY  BATES 

tion  of  getting  aboard,  called  out  to  them  not  to 
attemxDt  to  get  on  the  cars  while  they  were  in  motion. 
As  the  cars  were  moving  slowly,  they  paid  no  atten- 
tion to  this  official  warning,  and  clambered  aboard 
the  train.  The  result  of  their  disobedience  of  the 
railroadman's  command  was,  that  at  the  next  stop 
they  were  met  by  a  guard  of  soldiers,  and  all  marched 
off  under  arrest.  At  first  the  young  Americans 
treated  the  whole  affair  as  a  huge  joke,  and  inquired, 
with  mock  seriousness,  when  their  trial  for  the 
heinous  offense  of  jumping  on  a  moving  railway 
train  would  come  off.  But  they  changed  their  tone 
on  being  informed  that,  having  deliberately  violated 
an  ordinance  of  the  German  Empire,  they  had  been 
already  tried,  convicted,  and  sentenced  to  thirty 
days'  imprisonment. ' '  '^   The  experiences  of  Germany 

*The  experiences  iu  Germany  of  the  Hon.  Shelby  M.  CuUom, 
United  States  Senator,  while  not  so  severe  as  those  recounted  by  Mr. 
Depew,  were,  nevertheless,  sufficient  to  greatly  harrow  up  his  feel- 
ings. The  author  of  our  Interstate  Commerce  act  found  government 
ownership  and  management  of  railroads  there  anything  but  agree- 
able. He  discovered  that  it  greatly  increased  the  number  of  employes, 
and  surrounded  the  service  with  tedious  and  harassing  regulations. 
"There  is,"  he  said,  "at  each  station  a  small  army  of  uniformed 
employes,  who  make  more  fuss  about  the  arrival  or  departure  of  a 
train  than  one  sees  in  a  year's  travel  in  the  United  States.  If  Ameri- 
can railroads  were  to  employ  such  a  number  of  men,  and  pay  them 
the  current  American  rates  of  wages,  the  lines  could  not  earn  enough 
to  pay  them,  if  traffic  rates  were  doubled.  Then,  too,  except  at  some 
points,  the  government-owned  railroads  are  not  as  well  managed  as 
our  American  roads  are.  In  this  country  you  can  get  into  a  car, 
your  baggage  is  safe  without  your  bothering  about  it;  you  go  right 
on  to  your  destination,  and  the  conductor  and  a  couple  of  brakemen 
take  care  of  everything.  In  Germany  all  is  fuss  and  feathers.  Every 
railway  employe  is  a  government  official,  and  there  is  enough  red  tape 
to  weary  an  American." — Chicago  Post,  Sept.  24,  1891. 


AND  GOVERNMENT  CONTROL.  251 

are  not  peculiar.  It  is  thus  tyrannies  are  created 
or  kept  alive  everywhere.  An  assumed  necessity  is 
the  excuse  for  every  act  curtailing  man's  freedom, 
until  in  the  end  individual  liberty  is  lost  in  the 
multitude  of  enactments  laid  down  to  j)rotect  him 
from  himself.  One  of  the  chief  duties  of  the  gov- 
ernment servant  that  he  lays  down  for  himself,  and 
one  in  which  he  takes  the  greatest  delight,  is  the 
formation  of  these  rules.  But  what  is  most  aston- 
ishing is,  that  he  has  no  idea  that  anything  but  good 
to  his  fellow-man  can  come  of  his  action. 


CHAPTER    XIII. 

THE  TENURE  OF  EAILEOADS  UNDER  THE  LAW — THE 
INTERSTATE  COMMERCE  LAW  OF  THE  UNITED 
STATES — THE  REQUIREMENTS  OF  THE  ENGLISH 
LAW. 

The  railways  of  the  United  States  are  incorpo- 
rated under  general  or  si^ecial  laws.  Permission 
is  first  granted  to  subscribers  to  the  capital  stock  to 
form  a  company.  Thus  incorx^orated,  the  personal 
responsibility  of  the  owner  is  limited.  Attached  to 
incorporation  is  the  right  to  sue  and  be  sued;  to 
acquire,  by  condemnation,  land  and  property  sit- 
uated thereon;  to  charge  for  services  performed;  to 
enforce  rules  and  regulations,  and  do  other  things 
that  the  business  requires.  The  various  States  have, 
from  the  first,  arrogated  to  themselves  the  right  to 
enforce  such  regulations  as  seemed  to  be  necessary 
to  the  convenience  and  safety  of  the  people.  The 
conditions  under  which  capital  was  induced  to  sub- 
scribe to  railway  enterprises,  have  been  generally 
respected  by  the  government.  Some  of  the  notable 
exceptions  to  this  rule  I  have  noticed. 

The  inception  of  railway  enterprise  is  so  recent, 
and  its  development  so  great  and  unexpected,  that 
it  is  unavoidable  the  government  should  not,  in 
every  case,  have  apprehended  fully  the  situation  of 
affairs;  that  it  should  not  have  always  understood 

(253) 


254  BAILWAY  BATES 

the  reciprocal  relations  tliat  exist  between  the 
people  and  the  carrier,  and  the  necessity  of  their 
being  based  on  natural  laws,  and,  because  of  this 
lack  of  comprehension,  should  have  made  mistakes. 
Such  mistakes  were  not  only  to  be  exj)ected,  but 
were  excusable.  But  when  blindly  adhered  to,  after 
having  been  demonstrated  to  be  so,  they  become 
political  crimes. 

The  legal  incorporation  of  railroads  is  only  a 
feature.  Legislative  action  affects  them  in  every 
direction.  The  provisions  of  the  law  reach,  directly 
or  indirectly,  every  nook  and  crevice  of  the  service, 
take  cognizance  of  every  act.  The  government  con- 
cerns itself,  not  only  with  the  relation  of  the  carrier 
to  the  public  and  the  State,  but  also  to  his  employes. 
It  takes  notice  of  the  fiscal  methods  of  railroads, 
and  in  many  cases  the  price  they  shall  charge  for 
their  services.  It  prescribes  in  certain  directions 
the  physical  appliances  they  shall  use.  It  imposes 
the  duty  of  transporting  persons  and  property,  in- 
cluding the  mails,  and  fixes  the  responsibilities  and 
liabilities  attached  thereto. 

Legislation  affecting  railroads  divides  itself  under 
natural  heads,  such  as  taxation;  the  safety  of  the 
public  and  the  employe;  limitations  of  franchise; 
right  to  construct;  property  rights;  the  rates  that 
shall  be  charged;  the  supervisory  power  of  govern- 
ment. This  volume  refers  to  the  last  two.  In 
reference  to  the  others,  they  are  so  diffuse,  vary  so 
greatly  in  different  States  and  countries,  are  so  inter- 
twined with  the  law-making  power,  the  decisions  of 
judges,  the  force  of  X3recedents  and  common  practice, 


AND  GOVERNMENT  CONTROL.  255 

that  to  attempt  a  description  of  them  in  detail  would 
confuse  rather  than  enlighten.  I  shall,  therefore, 
not  attemj)t  it.  I  shall,  however,  have  occasion  to 
refer  to  various  aspects  of  the  subject  in  several  of 
my  books.*  The  reference  will,  however,  be  inci- 
dental only,  will  be  intended  to  afford  those  con- 
nected with  the  different  branches  of  the  service 
guidance,  rather  than  instruction.  Those  who  require 
a  technical  knowledge  of  legislation  affecting  rail- 
roads, their  rights,  limitations,  and  responsibilities, 
must  go  to  the  fountain-head  to  obtain  it;  to  the 
statutes,  the  decisions  of  the  courts,  the  rulings  of 
the  State,  common  i)ractice,  the  advice  of  lawyers, 
etc.,  etc.  They  can  not  be  embodied  in  any  volume 
or  series  of  volumes,  because  each  day  brings  with 
it  some  withdrawal,  addition,  or  modification  of 
right,  privilege,  immunity,  penalty,  duty,  or  resi)on- 
sibility. 

In  all  legislative  suiDervision  and  xDractice,  this  fact 
in  reference  to  commercial  affairs  should  be  borne  in 
mind,  namely,  that  no  enterprise  can  or  will  be 
prosecuted  successfully  that  does  not  remunerate 
all  parties  concerned;  that  does  not  pay  the  proprie- 
tor, as  well  as  his  patron  and  employe.  In  the  case 
of  railroads,  we  must  not  expect  of  them  safe  or  ade- 
quate accommodation,  if  we  deny  them  due  compen- 
sation.    The  owner,  like  every  other  manufacturer, 


*  Notably,  "Capitalization,  Construction,  and  Maintenance," 
"Train  Service,"  "Baggage,  Express,  and  Mail  Traffic  and 
Accounts,"  "  Passenger  Traffic  and  Accounts,"  "  Freight  Traffic  and 
Accounts,"  "Principles  to  be  Observed  in  Collecting  the  Receipts 
of  Carriers,"  "Railway  Disbursmeuts  and  Accounts,"  etc.,  etc. 


256  RAIL  WA  7  RA  TE8 

expects  and  is  entitled  to  a  return  i^roportionate  to 
the  value  of  his  property.  His  method  of  remuner- 
ation is  through  the  right  accorded  him  to  charge 
for  his  services.  To  qualify  this  right,  or  seriously 
limit  it,  is  to  cripple  him,  and  through  him  the  State. 
The  interests  of  the  two  are  co-existent.  They  can 
not  be  separated.  The  unthinking  and  the  vicious 
may  believe  it  possible,  but  exx^erience  will  teach 
them  their  mistake.  In  our  time  a  nation  is  x^ros- 
perous  or  otherwise  according  to  the  efficiency  of  its 
railroads;  according  to  the  measure  of  their  ade- 
quacy and  the  cheapness  of  their  service.  Comx^e- 
tition  with  other  countries  is  x^ossible  or  otherwise, 
according  to  the  measure  of  their  x^rosxDerity  and 
efficiency.  A  nation  advances  or  retrogrades,  grows 
rich  or  poor,  as  they  are  x^rosx^erous  or  otherwise. 

Referring  to  this  subject  in  connection  with  the 
United  States,  the  Interstate  Commerce  Commission, 
in  its  fourth  rex^ort,  says:  "The  railroads  have,  in 
fact,  been  the  most  important  x^hysical  agency  in 
national  recux^eration  since  the  great  civil  Avar,  and 
in  giving  wealth  and  x^i'osxDerity  to  the  country  as  a 
whole.  What  they  have  done  has  been  accomx3lished 
because  the  railroad  interest,  as  a  whole,  has  been 
X^rosx)erous,  and  whatever  would  unjustly  destroy 
or  restrict  their  prosperity  would  be  as  mischievous 
to  the  country  at  large  as  it  would  to  their  owners. ' ' 

The  greatest  single  blow  corx^orations  have  ever 
received,  in  this  or  any  other  country  that  x^rofesses 
to  resx^ect  law  and  X3roperty,  was  the  decision  of  the 
United  States  Sux^reme  Court,  instigated  thereto  by 
a  semi-xoolitical  judge,  that  agreements  entered  into 


AND  OOVEBNMENT  CONTBOL.  257 

between  the  State  and  the  railway  companies  might 
be  altered  or  amended  by  the  government  at  pleas- 
ure, the  carrier,  however,  being  held  meanwhile  to 
a  rigid  accountability  for  what  he  had  agreed  to  do. 
The  decision  was  misleading,  superficial,  and  dema- 
gogical. It  claimed  to  be  in  the  interest  of  the 
l^eople,  to  be  based  on  the  necessity  of  curbing  the 
spirit  of  corporate  power.  It  was  purely  i)olitical — 
a  blow  at  vested  rights,  at  free  institutions.  Its 
effect  was  to  unsettle  long-established  practices,  to 
create  distrust  in  the  minds  of  capitalists,  to  coun- 
tenance and  encourage  agrarianism,  to  intensify  the 
jealousy  of  the  masses,  to  make  the  x)eople  and  their 
rej^resentatives  less  amenable  to  reason  and  justice. 
It  sought  to  offer  up  the  owners  of  railways  as  a 
vicarious  sacrifice  to  the  spirit  of  discontent  abroad 
in  the  land.  The  author  of  the  innovation,  it  is 
gratifying  to  know,  only  partially  realized  the 
political  distinction  he  hoped  to  gain  from  it.  He 
is  now  dead.  He  represented  a  class  of  judicial 
IDarasites  of  which  we  have  as  yet  but  few,  but  of 
which,  owing  to  our  peculiar  methods,  we  stand  in 
constant  dread.  He  was  what  might  not  improperly 
be  called  a  judicial  hermaphrodite,  politician,  and 
judge;  a  man,  who,  dying,  left  behind  him  an  odor 
that  nothing  can  disj^el. 

In  marked  contrast  to  the  agrarian  spirit  of  this 
decision,  afterwards  emphasized  by  legislative  en- 
actments, has  been  the  steadfast  course  of  Great 
Britain  in  her  observance  of  the  rights,  privileges, 
and  immunities  granted  to  railways,  under  the  acts 
of    Parliament    creating   them.     Such  changes   as 

17 


258  RAILWAY  BATES 

she  has  made  in  these  enactments  have,  in  every 
case,  been  mutually  agreed  upon  by  all  parties  in 
interest  in  advance.  They  have  been  such  as  com- 
mend them  to  honorable  men.  Each  railroad  of 
Grreat  Britain,  it  should  be  remembered,  is  created 
by  special  act  of  Parliament;  the  government  claims 
and  exercises  the  right  of  veto  in  the  location  of  a 
road;  the  right  to  insj)ect  and  accept  it,  before  it 
shall  be  opened  for  business;  to  see  that  necessary 
measures  are  taken  to  secure  the  safety  of  the  pub- 
lic;* to  enforce  j)roper  and  equal  facilities  for  all; 
to  prevent  discrimination  in  rates;  to  reduce  rates 
when  the  return  on  the  x)roperty  exceeds  the  per- 
centage agreed  upon;  to  require  rates  to  be  posted 
at  stations;  to  require  all  freight  offered  for  trans- 
port to  be  received,  unless  it  be  dangerous;  to 
require  railroads  to  allow  the  use  of  their  tracks  to 
persons  who  wish  to  provide  their  own  equipment 
and  motive  power;  to  require  at  least  one  train  a 
day  to  be  run  each  way;  to  require  a  uniform  rate 
to  be  charged  to  passengers,  according  to  the  ac- 
commodation furnished,  allowing  a  given  amount 
of  baggage  free  in  each  case;  to  require  the  adoption 
of  a  standard  gauge;  to  carry  soldiers,  police,  pub- 
lic baggage,  and  government  stores  at  fixed  rates;  to 
run  such  mail  trains  as  the  postmaster  general 
shall  require;  the  right  to  inspect  the  i^roperty  and 
equipment  whenever  thought  proper;  to  make  regu- 
lations for  handling  the  trafSc  at  Junctions  in  a  safe 
manner;  and,   finally,    to  limit  the  return  on  the 


*  Railroads  ia  the  United  Kingdom  are  liable,  as  in  America,  under 
both  common  and  special  law,  for  injuries  to  persons  and  i^roperty. 


AM)  GOVERNMENT  CONTROL.  259 

capital  invested  to  the  amount  agreed  upon.  In 
every  case,  such  changes  as  have  been  made  in  the 
organic  law  of  railroads  have  been  mutually  agreed 
upon  by  the  government  and  the  corporation.  They 
have  been  a  matter  of  barter.  Where  a  company 
required  some  new  right  or  privilege,  the  govern- 
ment, before  granting  it,  has  exacted  such  changes 
in  the  original  act  as  seemed  right  and  proper. 
This  has  been  the  extent  of  its  coercion,  if  so  strong 
a  word  can  be  used.  The  government  has  said: 
"  We  will  give  you  the  rights  you  ask,  provided 
you  will  do  so  and  so,"  leaving  it  optional  with  the 
railroad  to  accept  or  decline.  On  the  other  hand, 
the  governing  power  in  America  has  been  both  arbi- 
trary and  exacting;  it  has  said  to  its  railroads: 
"  Reduce  your  rates  and  increase  your  facilities;  we 
do  not  care  about  your  rights,  nor  do  we  care 
whether  you  are  able  to  do  what  we  ask  or  not." 
The  difference  between  the  two  is  the  difference 
between  honest  practice,  give  and  take,  and  common 
robbery;  between  a  government  that  respects  the 
rights  of  all  its  citizens,  and  a  government  that 
respects  only  the  rights  of  those  having  the  greatest 
number  of  votes.  While  the  sxDirit  of  the  English 
government  has  been  conciliatory  and  fair,  it  has 
not  been  lax  or  disregardful  of  its  rights  and  duties. 
It  has  from  the  start  exercised  a  most  searching 
supervision  over  its  railways;  but  not  such  as  to 
lessen  the  responsibility  of  owners  and  managers,  or 
to  impair  their  efficiency  in  any  way. 

Any  reference  to  the  railroads  of  America,  and  the 
laws  governing  them,  would  be  incomi3lete  without 


260  BAIL  WAT  RATES 

a  description  of  the  supervisory  power  of  the  gen- 
eral government,  as  expressed  in  the  act  of  Congress 
creating  the  Interstate  Commerce  Commission.  The 
purjDose  of  the  act  is  to  bring  the  administration  of 
railroads  under  the  eye  of  such  commission.  Pre- 
vious to  its  becoming  operative,  in  1887,  such  gov- 
ernmental supervision  as  we  had  was  exercised  by 
the  various  States.  But,  as  their  powers  did  not  ex- 
tend to  business  XDassing  from  one  State  to  another, 
their  supervision  was  necessarily  limited.  The  act 
in  question  was  designed  to  cover  this  i^articular 
class  of  business  which  the  general  government 
alone  has  power  to  regulate.  Probably  no  more  im- 
portant act  of  legislation  affecting  the  internal  com- 
merce of  a  country  was  ever  devised. 

The  Interstate  Commerce  Commission  thus  cre- 
ated is  a  semi- judicial  tribunal,  having  most  ex- 
tended and  imx^ortant  powers.  The  rates  of  carriers 
come  within  its  notice  and  scope,  in  so  far  as  it  has 
power  to  decide  whether  a  rate  is  reasonable  and 
just,  or  not.  But  it  has  no  j)ower  to  fix  rates.  An 
important  part  of  the  act,  known  as  the  ' '  long  and 
short  haul  clause,"  is  as  follows: 

"It  shall  be  unlawful  for  any  common  carrier 
subject  to  the  provisions  of  this  act  to  charge  or  re- 
ceive any  greater  compensation  in  the  aggregate  for 
the  transportation  of  passengers,  or  of  like  kind  of 
proi)erty,  under  substantially  similar  circumstances 
and  conditions,  for  a  shorter  than  for  a  longer  dis- 
tance over  the  same  line  in  the  same  direction,  the 
shorter  being  included  within  the  longer  distance;  but 
this  shall  not  be  construed  as  authorizing  any  com- 


AND  GOVERNMENT  CONTROL.  261 

mon  carrier  within  the  terms  of  this  act  to  charge 
and  receive  as  great  compensation  for  a  shorter  as 
for  a  longer  distance :  Provided,  however,  that  upon 
application  to  the  commission  appointed  under  the 
j)rovisions  of  this  act,  such  common  carrier  may,  in 
special  cases,  after  investigation  by  the  commission, 
be  authorized  to  charge  less  for  longer  than  for 
shorter  distances  for  the  transportation  of  passen- 
gers or  jDroperty;  and  the  commission  may  from 
time  to  time  ptrescribe  the  extent  to  which  such  des- 
ignated common  carrier  may  be  relieved  from  the 
operation  of  this  section  of  this  act." 

The  discretion  here  allowed  the  commission  is  of 
the  greatest  necessity  and  wisdom.  It  appears, 
however,  too  great  to  be  exercised  in  a  practical 
way  by  any  human  body,  however  capable  or  indus- 
trious it  may  be — and  the  Interstate  Commerce  Com- 
mission is  both.  The  wording  of  the  law  suggests 
that  the  work  is  to  be  done  in  detail,  not  in  the  aggre- 
gate. This  is  a  Herculean  task,  impossible  of  ade- 
quate fulfillment.  Except  for  the  right  accorded  rail- 
roads to  carry  long  distances  at  a  less  rate  relatively 
than  for  short  distances,  the  act  would  have  resulted 
in  ruining  our  internal  commerce,  and  disrupting 
our  federal  union.  It  would  have  destroyed  the 
mutual  dependence  of  one  section  uj)on  another, 
consequent  upon  the  interchange  of  j)roducts.  It 
would  have  built  up  local  centers  of  industry  an- 
tagonistic to  all  others.  This  antagonism  would  at 
first  have  been  slight,  but  would  finally  have  culmi- 
nated in  hatred  and  war.  Such  would  have  been 
the  effect  of  the  enforcement  of  the  rule  preventing 


262  RAILWAY  RATES 

the  great  railways  that  traverse  the  continent  from 
making  rates  that  woukl  have  brought  the  most 
distant  places  into  close  relationship  with  each 
other,  through  the  interests  that  attach  to  an  inter- 
change of  business.  But  carriers  exercise  the  right 
at  a  tremendous  sacrifice— one  they  should  never 
have  been  called  upon  to  make.  It  was  at  first 
thought  that  refusal  to  allow  carriers  to  charge  less 
for  a  long  than  for  a  short  haul  would  prevent 
unjust  discrimination,  and  would  otherwise  result 
in  great  good  to  the  community.  But,  like  every 
other  interference  with  the  natural  laws  of  trade 
and  the  common  practices  of  traders,  it  is  imprac- 
ticable. The  value  of  the  concession  in  the  law  of 
the  right  to  charge  less  for  a  greater  than  a  shorter 
distance,  is  greatly  lessened  by  the  fact  that  it  can 
onlj^  be  apx)lied  in  special  cases,  after  investigation 
by  the  commission.  The  emergencies  of  business 
do  not  admit  of  such  delay.  The  idea  that  it  will 
wait  until  permission  can  be  obtained  from  Wash- 
ington, is  absurd.  Rates  must  be  made  on  the 
moment,  as  the  exigency  arises.  If  they  are  found 
to  be  improper  or  unjust,  the  commission  should 
have  the  right  to  change  them.  This  would  not 
weaken  its  power  in  any  way,  but  would  strengthen 
it,  by  making  its  loractices  conform  to  business  needs. 
The  benefits  that  were  expected  to  accrue  from 
the  long  and  short  haul  clause  have  never  been 
realized.  No  single  enactment  ever  devised  by  man, 
it  is  probable,  has  occasioned  so  much  confusion  as 
this.  It  upset  at  one  blow  every  rate  in  the  country, 
destroyed  at  one  stroke  the  result  of  fifty  years  of 


A^'D  GOVERNMENT  CONTROL.  2G3 

experience  and  adjustment  between  carriers,  com- 
munities, and  jDersons.  It  disregarded  alike  the 
laws  of  trade  and  the  customs  of  business.  A  former 
member  of  the  commission,*  referring  to  the  act, 
says  one  of  its  effects  upon  railroads  ' '  has  been  the 
loss  which  it  has  entailed  in  continuing  competition 
for  through  business  over  the  routes  longer  than  the 
most  direct  line  to  a  given  terminal.  Many  well- 
established  routes  of  traffic  are  quite  circuitous,  and 
some  that  are  in  active  use  are  nearly  twice  as  long 
as  the  short  line.  Business  for  local  points,  upon 
routes  of  this  character,  would  naturally  be  carried 
upon  tariffs  graded  increasingly  with  the  distance ; 
but  when  a  point  is  reached  where  the  rate  is  as 
high  as  the  rate  by  the  short  line  to  the  distant 
terminal,  the  law  forbids  any  further  advance,  and 
the  road  was  given  the  alternative  of  reducing  its 
intermediate  rates  or  retiring  from  the  competitive 
business.  This  condition  is  found  in  every  part  of 
the  country  ;  and  the  value  of  participation  in  the 
through  business  usually  has  been  felt  to  require 
the  acce^Dtance  of  the  sacrifice  demanded  by  the  law 
at  local  stations.  The  statute,  in  this  respect  also, 
favors  the  direct  lines  against  those  which  have  a 
greater  mileage,  by  making  it  much  more  expensive 
for  the  latter  to  compete  with  the  former.  The  opera- 
tion of  this  rule  has  removed  from  many  jobbing 
centers  important  advantages  which  they  previously 
had,  and  has  enabled  interior  communities,  formerly 
of  little  apparent  consequence,  to  deal  directly  with 

*AldaceF.  W^alker. 


264  RAILWAY  RATES 

distant  markets.  Interior  mannfactnring  points 
have  also  felt  its  blight.  In  other  words,  it  has 
worked  to  the  advantage  of  the  great  points  of  im- 
portation, production,  and  distribution,  and  to  the 
disadvantage  of  the  minor  cities  and  towns,  which 
had  formerly  been  known  as  jobbing  points  or  trade 
centers,  within  the  various  States  in  the  interior  of 
the  country.  This  tendency  soon  became  so  marked 
that  the  jobbers  in  some  of  the  States  labored  for, 
and  in  some  instances  were  able  to  obtain.  State 
legislation  which  was  designed,  and  which  had  the 
effect,  to  partially  nullify  the  principles  of  the  inter- 
state commerce  law." 

The  Interstate  Commerce  act  may  be  briefly  sum- 
marized as  follows.  It  is  intended  to  api:»ly  to  car- 
riers engaged  in  the  transi)ortation  of  passengers 
or  property  wholly  by  railroad,  or  partly  by  rail- 
road and  partly  by  water,  when  both  are  used, 
under  a  common  control,  management,  or  arrange- 
ment, for  a  continuous  carriage  or  shipment  from  one 
State  or  Territory  to  any  other  State  or  Territory, 
or  from  any  i3lace  in  the  United  States  to  an  adja- 
cent country,  or  through  a  foreign  country  to  any 
other  place  in  the  United  States;  it  also  applies  to 
the  transportation  of  jjroperty  shipped  from  any 
place  in  the  United  States,  to  a  foreign  country,  and 
carried  from  such  place  to  a  port  of  transhipment, 
or  shipped  from  a  foreign  country  to  any  place  in 
the  United  States,  and  carried  to  such  place  from 
a  port  of  entry,  either  in  the  United  States  or  an 
adjacent  foreign  country.  The  provisions  of  the 
act  do  not  apply  to  the  transportation  or  handling 


AND  OOVERWMENT  CONTROL.  265 

of  property  wholly  within  one  State,  and  not 
shipped  to  or  from  a  foreign  conntry  from  or  to  any 
State  or  Territory.  The  term  railroad  includes  all 
bridges  and  ferries  used  or  oj)erated  in  connection 
with  any  railroad,  and  also  all  the  roads  in  use  by 
the  carrier,  whether  owned  by  him,  or  operated 
under  lease,  or  otherwise.  The  term  transporta- 
tion includes  all  instrumentalities  of  shipment  or 
carriage. 

The  act  i^rovides  that  charges  shall  be  reasonable; 
it  forbids  unjust  discrimination,  undue  or  unjust  pref- 
erence, and  requires  that  carriers  shall  aiford  reas- 
onable and  equal  facilities  for  interchange  of  traffic; 
it  enacts  that  carriers  shall  not  receive  any  greater 
compensation  in  tlie  aggregate  for  the  transporta- 
tion of  passengers  or  property  for  a  shorter  than  a 
longer  distance,  as  already  mentioned;  it  prohibits 
pooling;  by  its  provisions  carriers  are  required  to 
keep  printed  schedules  of  their  rates  posted  at 
stations,  and  no  advance  therein  is  allowed,  except 
after  ten  days'  j)ublic  notice,  nor  may  reductions 
be  made,  excej)t  after  three  days'  notice;  the  act 
requires  carriers  to  file  with  the  commission  copies  of 
all  their  schedules  of  rates,  and  notify  it  of  alterations 
therein;  they  must,  also,  file  with  the  commission 
copies  of  all  their  contracts,  agreements,  or  arrange- 
ments with  other  carriers;  all  joint  tariffs  must,  also, 
be  filed  with  the  commission,  and  made  public  in 
such  manner  as  the  commission  determines;  ad- 
vances and  reductions  in  joint  tariffs  may  be  made 
only  as  in  the  case  of  ordinary  tariffs.  The  law 
j)rovides  that  carriers  may  charge  no  more  or  less 


266  RAIL  WA  T  RA TES 

than  published  tariff  rates;  that  continuous  car- 
riage of  freight  must  not  be  unnecessarily  inter- 
rupted; that  carriers  contravening  the  act  are  liable 
in  damages,  and  that  railway  oflacials  implicated 
shall  be  compelled  to  testify  and  produce  their  com- 
panies' books,  a  claim  that  such  testimony  might 
criminate  the  person  giving  it  not  being  accepted  as 
an  excuse.  The  law  is  highly  x^enal.  Punishment 
for  violation  is  fine,  imprisonment,  and,  in  some 
cases,  damages  as  well.  It  imposes  jjenalties  for 
false  billing,  false  classification,  false  weighing, 
false  representation  of  contents  of  xoackages,  false 
reports  of  weights  by  shii^pers,  inducing  carriers  to 
discriminate  unjustly,  etc.  A  commission  of  five 
members  is  created  by  the  act.  It  is  known  as  the 
Interstate  Commerce  Commission.  The  members 
hold  office  for  six  years.  This  commission  has 
power  to  inquire  into  the  management  of  the  busi- 
ness of  common  carriers,  subject  to  the  act,  to  com- 
pel the  attendance  of  witnesses,  and  production  of 
books  and  papers,  to  hear  and  adjudicate  upon 
com]3laints  made  against  railroads.  The  law  pro- 
vides that  the  findings  of  the  commission  shall  be 
accepted  as  prima  facie  evidence,  in  judicial  pro- 
ceedings; that  its  reports  of  investigations  sliall  be 
of  record  ;  that  it  may  provide  for  the  publication 
of  its  reports  and  decisions,  and  that  such  publica- 
tions shall  be  the  evidence  thereof.  In  case  of  the 
violation  of  the  act,  or  of  any  other  law,  by  a 
carrier,  or,  in  case  injury  has  been  sustained  by 
any  person  in  consequence  of  such  violation,  and 
the  commission  is  satisfied  of  the  fact,  it  is  required 


AND  OOVERNMENT  CONTROL.  267 

to  give  the  carrier  interested  notice,  requiring  it  to 
desist  or  make  reparation,  or  both,  within  a  specified 
time;  if  within  the  time  it  ai:)i:)ears  that  the  carrier 
has  conformed  to  the  commission's  requirements, 
the  fact  is  recorded,  and  the  carrier  released  from 
liability.  In  the  event  of  the  refusal  by  a  carrier  to 
comply  with  the  requirements  of  the  commission, 
the  latter  is  empowered  to  petition  the  courts  author- 
ized to  hear  and  determine  the  matter,  and  if  the 
court  decides  that  a  lawful  order  of  the  commission 
has  been  disobeyed,  it  is  required  to  issue  proi)er 
process  to  enforce  it.* 

The  commission  is  empowered  to  make  rules  for 
the  conduct  of  its  own  proceedings;  parties  may 
ai^pear  before  it,  either  in  person  or  by  attorney. 
Every  vote  and  official  act  of  the  commission  is  of 
record;  it  has  a  seal  which  is  judicially  noticed,  and 
its  members  may  administer  oaths  and  affirmations, 
and  sign  subpoenas.  The  principal  office  of  the 
commission  is  at  Washington,  but  it  may  hold  sj^e- 
cial  sessions  in  any  part  of  the  United  States,  and 
may  jDrosecute  any  inquiry  necessary  to  its  duties 
in  any  -p^vt  of  the  Union.  The  commission  is  also 
authorized  to  require  annual  reports  from  carriers 
in  such  form  as  it  may  j)rescribe,  and  may  prescribe 
methods  of  bookkeeping.  It  makes  an  annual  re- 
port to  Congress,  embodying  such  information  and 
data  as  it  considers  valuable,  and  also  recommenda- 
tions as  to  additional  legislation.     The  law  permits 


*  If  the  order  of  the  court  is  disregarded,  a  fine  of  $500  per  day 
maybe  levied  upon  the  offender.  In  cases  involving  over  $2,000, 
appeal  may  be  had  to  the  Supreme  Court  of  the  United  States. 


268  li^^IL WA  Y  RATES 

the  carriage,  storage,  or  handling  of  iDroperty  with- 
out charge,  for  federal.  State  and  municipal  govern- 
ments; also  for  charitable  purposes,  and  for  fairs 
and  expositions.  It  allows  the  free  carriage  of  des- 
titute and  homeless  persons,  the  issuance  of  mile- 
age, excursion,  or  commutation  passenger  tickets, 
reduced  rates  to  ministers  of  religion,  and  free  trans- 
X)ortation  to  the  officers  and  employes  of  railways. 
Finally,  it  gives  jurisdiction  to  the  courts  to  issue 
writs  of  mandamus,  requiring  the  movement  of  in- 
terstate traffic  and  the  furnishing  of  cars  and  other 
facilities. 

The  Interstate  Commerce  law  is  necessary  and 
beneficial  in  many  things,  and  this  fact,  coupled 
with  the  high  character  of  the  commission,  entitles 
it  to  the  greatest  respect.  The  law,  however,  needs 
changing  in  several  imx)ortant  particulars.  In  ref- 
erence to  its  effect  upon  comx^etitive  practices,  I  do 
not  know  that  I  can  do  better  than  quote  further  what 
is  said  by  Mr.  Aldace  F.  Walker.  ' '  The  operation 
of  the  law  has  intensified  former  conditions.  .  .  . 
When  the  act  took  effect,  railway  rates  in  the  United 
States,  esx^ecially  the  long-distance  freight  rates  on 
which  interstate  traffic  is  moved,  had  reached  a 
jDlane  so  low  as  to  be  the  wonder  of  the  world.  The 
forces  which  drove  rates  downward  during  the 
twenty  years  previous  to  the  enactment  of  the  stat- 
ute have  since  continued  in  play,  and  other  potent 
influences  in  the  same  direction  have  been  added  by 
the  law.  Whether  this  result  is  or  is  not  of  ulti- 
mate advantage  to  the  public,  may  be  oioen  to  ques- 
tion.    It  is  undeniable  that  a  point  must  at  some 


AND  GOVERNMENT  CONTROL.  260 

time  be  reached  where  further  rate  reductions  will 
seriously  inconvenience  the  public  by  becoming  the 
occasion  of  unwise,  and  perhaps  fatal,  reductions  of 
expenditures  in  railway  maintenance  and  service, 
as  well  as  the  cause  of  bankruptcies  and  the  com- 
mercial disasters  which  follow  in  their  train,  .  . 
.  .  When  the  law  first  went  into  operation,  it  was 
felt  that  a  new  era  had  arrived.  The  statute  de- 
manded the  undeviating  and  inflexible  maintenance 
of  the  published  tariff  rates.  Rebates,  drawbacks, 
and  all  other  devices  whereby  a  carrier  should  re- 
ceive from  one  person  greater  or  less  compensation 
for  any  service  rendered  than  from  another  for  a 
like  service,  were  expressly  declared  unlawful,  and 
were  j)i^nishable  by  a  heavy  fine.  This  was  just 
what  conservative  and  influential  railway  managers 
desired.  It  was  not  only  just,  but  it  protected  their 
revenues.  The  new  rule  was  cheerfully  accepted, 
and  imperative  orders  were  issued  for  its  obedience. 
But  toward  the  close  of  1887,  it  began  to  be  x^erceived 
that  there  were  difficulties,  which  became  much  more 
serious  in  1888.  On  even  rates  the  traffic  naturally 
flowed  to  the  direct  lines,  which  could  give  the  best 
service  and  make  the  best  time.  Roads  less  direct, 
or  of  less  capacity,  roads  with  higher  grades  or  less 
advantageous  terminals,  and  roads  otherwise  at  a 
disadvantage,  found  that  business  was  leaving  them. 
It  was  discovered  that  the  law  in  this,  its  most  es- 
sential feature,  as  well  as  in  other  respects,  was 
13ractically  a  direct  interference  by  the  government 
in  favor  of  the  strong  roads  and  against  the  weak. 
Dissatisfaction  arose  among  officials  of  roads  whose 


270  RAILWAY  RATES 

earnings  were  reduced,  and  wliicli  were  often  near 
the  edge  of  insolvency.  It  had  been  customary  for 
them  to  obtain  business  by  rebates  and  other  like 
devices,  and  they  knew  no  other  method.  It  pres- 
ently became  to  some  of  them  a  case  of  desperation. 
There  was  nothing  in  the  law  specifically  forbidding 
the  payment  of  commissions,  and  it  was  found 
that  the  routing  of  business  might  be  secured  to  a 
given  line  by  a  slight  expenditure  of  that  nature  to 
a  shipper's  friend.  Other  kindred  devices  were 
suggested — some  new,  some  old.  ...  If  the 
carriers  had  been  left  free  to  make  arrangements 
among  themselves,  upon  which  each  line  might  rely 
for  eventually  receiving,  in  some  form,  a  fair  share 
of  competitive  traffic,  the  temptation  for  secret  rate- 
cutting  would  have  been,  in  a  great  measure,  re- 
moved, and  the  country  would  have  been  spared 
most  of  the  traffic  disturbances  and  illegitimate  con- 
trivances for  buying  business  which  have  since  been 
periodically  rife." 

Interference  with  the  laws  of  trade  and  the  prac- 
tical necessities  of  business  has  resulted  here,  as  it 
always  does  when  governments  interfere,  in  making 
matters  worse  instead  of  better.  In  preventing  pool- 
ing, the  government  dej^rived  the  railroads  of  the 
right  to  i^rotect  themselves,  and  transferred  to  an 
army  of  middle-men,  in  the  shaj)e  of  commissions, 
revenues  needed  to  maintain  the  property,  provide 
facilities,  and  pay  interest. 

In  addition  to  the  Interstate  Commerce  Act  de- 
scribed above,  each  State  of  the  Federal  Union  is 
more  or  less  actively  engaged  in  supervising  the 


AKD  GOVERNMENT  CONTROL.  271 

State  business  of  railroads.  Many  of  the  States 
claim  and  exercise  the  right  of  making  rates,  re- 
gardless of  owners  or  managers.  Tlie  inexx)ediency 
of  this,  after  what  has  been  said  on  the  subject,  need 
not  be  further  pointed  out.  The  States  exercise  sole 
X:»olice  i:»owers  over  tlie  raih^oads  witliin  their  borders. 
They  each  and  all  require  returns  of  receipts  and 
expenditures  and  other  details  of  operation.  Their 
supervision  is  minute  and  searching.  In  some  States 
it  is  arbitrary  and  tyrannical,  in  others  not  noticea- 
bly objectionable.  Tlie  situation  in  several  States  is 
fraught  with  great  peril.  But  time  and  sober  second 
thought  will,  it  is  believed,  bring  relief. 


CHAPTER    XIY. 

MUTUALITY    OF    INTEREST    IN    THE    PROSPERITY    OF 
RAILWAYS. 

Having  pointed  out  the  more  important  principles 
that  govern  the  affairs  of  railroads,  and  the  conditions 
necessary  to  the  economical  and  efficient  manage- 
ment of  such  properties,  it  may  be  proper  to  say  a 
word  in  regard  to  the  concern  the  community  has  in 
their  prosperity.  It  is  special  and  perpetual.  The 
multitude  of  details  incident  to  the  conduct  of  rail- 
roads, while  embracing  many  things  that  are  pe- 
culiar, are,  in  the  main,  common  to  every  business 
and  of  general  interest.  So  far  as  concerns  the  con- 
struction and  keeping  in  order  of  the  plant,  it  is  not 
noticeably  different  from  that  of  other  manufactur- 
ers. They  are  liberal  consumers  of  the  products  of 
others,  and  generous  and  continuous  patrons  of  la- 
bor. Their  disbursements  cover  an  infinite  num- 
ber of  things,  and  have  three  purposes  in  view:  the 
construction  of  the  j)roperty,  and  its  successful 
maintenance  and  operation.  These  disbursements 
embrace  every  variety  of  object,  from  the  purchas- 
ing of  land  for  tracks,  stations,  and  shops,  to  the 
payment  of  employes;  from  the  erection  of  mam- 
moth warehouses  to  the  planting  of  shade-trees; 
from  the  purchasing  of  a  locomotive  to  the  i^rocure- 
ment  of  a  tin  cup;  from  the  purchasing  of  a  cargo 


18 


(273) 


274  RAIL  WAT  BATES 

of  coal  to  the  insertion  of  an  advertisement  in  a 
newspaper;  from  the  hiring  of  a  scrub- woman, 
through  all  occupations,  trades,  and  callings,  to  the 
employment  of  a  constitutional  lawyer.  The  dis- 
bursements of  railways  are  general.  They  help  to 
aggrandize  every  class  of  society,  and  are  the  life- 
blood  of  many  important  interests  and  trades.  They 
may  be  likened  unto  the  widespread  branches  of  a 
great  tree,  under  whose  generous  canopy  widely  sep- 
arated industries  find  shelter  and  jDrotection. 

The  industries,  thus  nurtured,  animate  in  turn 
still  others. 

The  disbursements  of  a  railway  company  are  of 
two  kinds,  permanent  and  incidental.  Under  the 
former  may  be  embraced  those  of  a  preparatory 
nature,  those  connected  with  the  building  up  of  a 
property;  under  the  latter,  those  incidental  to  its 
operation  and  maintenance.  Permanent  disburse- 
ments cover  first  cost,  including  rights,  X3rivileges, 
and  franchises.  Incidental  expenditures  include 
operating  exjpenses,  taxes,  interest,  and  dividends."* 

A  very  large  and  respectable  class  of  peoi)le — 
indeed,  I  think  I  may  say  a  majority — do  not  think 
of  railroads  except  as  common  carriers,  as  real  or 
semi-monopolies;  as  gigantic  properties  owned  by 
non-resident  stockholders,  in  the  main  illiberal  in 
their  tendency  and  short-sighted  in  policy;  aliens, 
so  to  si^eak,  having  nothing  in  common  with 
the  people  they  serve;  aggregations  of  capitalists 
leagued  together  for  profit,  without  thought  of  the 

*  Particulars  in  regard  to  disbursements  will  be  carefully  elabo- 
rated in  "  Railway  Disbursements  and  Accounts." 


AND  GOVERNMENT  CONTROL.  275 

permanent  interests  of  the  communities  they  serve; 
short-sighted,  selfish,  and  soulless.  Nothing  could 
be  farther  from  the  truth.  The  interests  of  railway 
companies  and  farmers,  manufacturers,  and  mer- 
cliants,  occuxDying  a  common  territory,  are,  as  I  have 
pointed  out,  identical  and  insej)arable.  Disaster  can 
not  overtake  the  latter  without  afllecting  the  former. 
Nor  can  the  carrier  be  j)rosi)erous  if  the  others  are  not. 

The  railroad  companies  of  a  country  are  much 
more  concerned  in  the  well-being  of  farmers,  mer- 
chants, and  manufacturers,  than  a  newsj^aper  or 
lawyer  can  i)ossibly  be.  Why?  Because  their 
pros23erity  is  bound  up  forever  with  them.  There 
is  no  escape;  can  never  be  any  cessation  of  interest, 
any  other  resource;  they  rise  or  fall  together. 

The  capital  invested  in  railroads  is  so  vast,  and  so 
fixed  in  perpetuity  in  the  heart  of  a  country,  that 
owners  must  always  be  the  first  to  apprehend  any 
disaster  to  the  people;  the  first  to  discountenance 
any  act,  the  effect  of  which  will  be  to  injure  or  crip- 
ple them.  They  look  to  them  for  support,  for  a 
profitable  business.  Without  it  their  i^roperty  is 
valueless. 

No  other  interest  is  so  permanent  and  consistent 
as  that  of  a  railroad.  It  can  not  be  moved,  and  has 
no  value  outside  its  immediate  use.  Carriers  are, 
for  this  reason,  peculiarly  amenable  to  the  good  will 
of  their  patrons;  are  especially  desirous  of  securing 
their  confidence  and  support.  Self-interest,  if  not 
inclination,  compels  them  at  all  times  to  pursue  an 
equitable  policy  towards  their  patrons,  and  self- 
interest  of  this  nature,  is  the  only  interest  that  never 


276  BAILWA7  RATES 

changes,  is  never  fickle,  is  always  loyal,  alert,  and 
intelligent.  All  others  are  transitory,  selfish,  and 
short-sighted;  quite  as  likely  to  injure  as  to  benefit. 

Much  of  the  capital  invested  in  railways  has 
never  returned  anything  whatever  to  its  owners. 
The  bulk  of  the  earnings  of  a  great  mass  of  railway 
property  is  paid  out  each  month  for  wages,  supplies, 
and  taxes,  without  leaving  anything  for  the  invest- 
or. It  is  estimated  that  sixty-four  per  cent,  of  earn- 
ings is  expended  as  fast  as  it  accrues,  for  operating 
expenses.  The  money  never  leaves  the  community 
where  it  is  earned — scarcely  reaches  the  treasury  of 
the  carrier.  In  addition  to  this,  more  or  less  is  dis- 
bursed, each  year  for  improvements  and  additions. 
These  expenditures  will  go  on  forever.  Under  the 
most  favorable  circumstances,  the  return  on  railway 
investments  is  not  such  as  would  satisfy  active  busi- 
ness men  or  investors  generally.  It  is,  at  the  best, 
meagre  and  uncertain. 

A  large  percentage  of  the  expenses  of  a  railroad, 
company  is  made  up  of  wages  paid  employes.  They 
represent  a  po^Dulation  five  times  their  own  number. 
This  enormous  mass  of  people  gives  employment  in- 
cidentally to  another  large  class  occupied  in  supply- 
ing its  wants.*     Still  another  class  is  engaged  in 

*  "  One  man  out  of  every  eighteen  and  a  lialf  men  occupied  in  any 
kind  of  work  in  this  country,  either  mental  or  manual,  was  employed 
in  1880  in  connection  with  railroads,  and  since  then  the  proportion 

has  been  greater For  many  years,  more  than  one  man 

in  every  ten  men  employed  in  any  kind  of  gainful  occupation,  aside 
from  agriculture,  has  been  engaged  either  in  constructing  or  operat- 
ing railways." — Edward  Atkinson,  "  The  Distribution  of  Products," 
page  280. 


AND  GOVERNMENT  CONTROL.  277 

preparing  the  material  which  railways  need;  another 
class  is  busied  in  ministering  to  the  wants  of  the 
latter.  These  classes  represent  the  most  indus- 
trious and  frugal  element  of  society.  They  are  one 
and  all  affected,  in  a  marked  manner,  by  the  pros- 
perity or  otherwise  of  railroads. 

If  we  should  attempt  to  trace  the  beneficiaries  of 
railroads,  we  should  find  them  in  every  vocation  of 
life;  in  every  trade  and  calling;  in  our  mercantile 
houses,  in  express  and  telegraph  ofl&ces,  in  manufact- 
uring establishments,  work-shops,  printing  rooms, 
banks,  the  offices  of  lawyers  and  doctors;  in  stores 
of  every  kind;  in  our  mines,  in  our  forests,  upon 
our  farms,  and  in  the  employ  of  railroads.  Our  tel- 
egraph and  express  systems,  with  their  great  number 
of  employes  and  dependent  classes,  are  but  append- 
ages of  the  railway  interest;  are  directly  affected  by 
it.  If  it  is  injured,  they  are  correspondingly  affected. 
This  vast  army,  so  widely  separated,  so  diversified, 
yet  so  closely  associated  in  interest,  is  vitally  con- 
cerned in  the  prosperous  and  uninterrui^ted  oper- 
ation of  railways;  in  seeing  that  no  injustice  is 
done  them;  in  seeing  that  they  are  allowed  to  carry 
on  their  business  according  to  its  just  needs,  equita- 
bly and  fairly.  If  we  should  attempt  to  trace  the 
community  of  interest,  we  should  find  the  line 
lengthened  and  broadened  until  it  embraced  every 
human  being.  We  should  find  that  there  was  no 
diversity  anywhere  —  that  injustice  or  harm  to  rail- 
roads reacted  unfavorably  on  all. 

Of  the  injurious  effect  on  the  individual  and  col- 
lective members  of  society,  because  of  the  warfare 


278  R^UL  WA  T  RA TES 

that  lias  been  made  on  railroads  in  tlie  United 
States,  those  most  affected  have  known  nothing. 
They  have  not  only  been  indifferent,  bnt  have  been 
particiiDants  oftentimes.  They  have  neither  under- 
stood nor  appreciated  the  community  of  interest 
that  existed.  They  looked  on  complacently.  It 
was  somebody  else' s  bull  that  was  being  gored.  In 
this  they  erred.  Each  one  of  them  contributes 
from  his  own  veins  some  portion  of  the  blood  that 
is  being  si^ilt;  each  one  is  robbed;  each  one  is  in- 
jured. They  "would  discover  this  if  they  stopped  to 
trace  the  close  relation  that  carriers  in  our  day  sus- 
tain to  every  industry  and  calling;  to  trace  cause 
and  effect.  The  employes  of  railroads,  and  those 
engaged  in  the  manufacture  of  railway  supplies, 
and  all  the  classes  dependent  upon  them,  are,  above 
all  others,  especially  and  markedly  concerned  in 
the  prosperity  of  railways.  In  order  to  enable  a 
company  to  i)ay  fair  wages,  to  buy  needed  supplies, 
and  make  necessary  improvements  and  additions,  it 
must  be  accorded  fair  treatment  and  equitable  rates.* 


*  No  other  capitalized  industry,  -whether  controlled  by  persons 
acting  as  individuals  or  in  a  corporate  capacity,  purchases  so  largely 
in  the  general  markets  of  a  country.  These  purchases  give  employ- 
ment to  vast  numbers  of  people,  directly  and  indirectly.  Railroads 
are  also  the  largest  single  employers  of  common  and  professional 
labor.  Vast  numbers  of  civil  engineers  and  attorneys  find  steady  or 
occasional  employment  in  their  service,  and  many  eminent  doctors 
and  surgeons  thus  add  largely  to  their  income.  Few  indeed  are  the 
professional  men  who  live  along  the  lines  of  our  railroads,  who  have 
not,  at  some  period  of  their  experience,  found  both  profit  and  pro- 
fessional distinction  in  the,  to  them,  fortuitous  circumstances  that 
called  them,  either  temporarily  or  permanently,  into  the  service  of 
some  railroad  company. 


AND  GOVEBmiENT  CONTROL.  279 

The  pocket  of  every  individual  is  directly  affected 
by  any  act  of  injustice  to  railroads.  Herein  lies  the 
hope  of  everyone  who  wishes  to  see  fair  i^lay.  When 
the  pocket  is  touched,  we  may  be  sure  the  conscience 
and  intelligence  of  the  individual  will  not  long 
slumber.  We  may  therefore,  I  think,  safely  leave 
the  interests  of  railroads,  so  far  as  the  community  is 
concerned,  to  time  and  the  reflections  of  mankind. 
Enlightenment  is  all  that  is  required.  When  the 
public  understand  that  the  prosperity  of  railroads 
is  necessary  to  their  own  x^rosperity  ;  that  it  must 
be  continuous,  not  spasmodical ;  that  railroads  must 
have  an  income  sufficient  to  remunerate  owners  and 
meet  necessary  and  reasonable  expenses  of  opera- 
tion and  maintenance  ;  that  the  confidence  of  those 
who  own  railroads  must  be  respected,  they  will 
accord  them  jirotection  and  regard.  When  this  is 
generally  understood,  the  peoj)le  will  frown  upon 
unjust  and  demagogical  acts  affecting  railway  proj)- 
erty  with  the  same  unanimity  that  they  frown  uiion 
open  or  covert  attacks  upon  financial  institutions, 
mercantile  houses,  manufactories,  and  other  inter- 
ests necessary  to  the  comfort  and  x)rosx3erity  of 
society.  Heretofore,  the  community  of  interest  has 
appeared  so  distant,  has  been  so  illy  defined,  as  not 
to  be  recognized.  Hence  the  indifference  of  all 
classes,  even  of  railway  employes,  to  attacks  upon 
railways.  The  indifference  has  been  like  that  of  a 
man  who  stood  calmly  by  and  watched  the  burning 
of  his  own  house,  under  the  impression  that  it  was 
the  house  of  an  enemy. 

In    addition  to  those  I    have   particularized  as 


280  HAIL  WAY  BATES. 

directly  affected  by  the  disbursements  of  railways, 
there  is  another  and  constantly  growing  class,  for 
which  this  phase  of  the  subject  possesses  a  vital 
interest.  I  refer  to  the  owners  of  railway  bonds  and 
stocks.  They  are  more  or  less  def)endent  for  their 
support  upon  the  return  their  investment  renders. 
Attacks  on  railroads  not  only  endanger  the  returns 
on  such  securities,  but  endanger  the  i)rincipal  as 
well.  They  certainly  affect  the  selling  price.  The 
owners  of  these  securities  embrace  representatives 
from  every  branch  of  society — capitalists,  business 
men,  clergj^men,  clerks,  trustees  of  estates,  mana- 
gers of  savings  banks,  widoAvs,  children,  sewing 
women,  and  others.  A  default  of  interest  or  a  re- 
duction of  a  dividend  means,  to  them  (or  the  bulk 
of  them,  at  least),  something  more  than  an  incident 
or  inconvenience.  It  means  a  sacrifice  of  x^roiierty 
to  meet  present  necessities.  It  foretells  future 
anxiety,  destitution,  want.  All  these  people  are 
concerned  in  putting  a  stop  to  demagogical  warfare 
on  railroads.  The  number  of  those  directly  inter- 
ested in  the  welfare  of  railways  can  not  be  com- 
puted. They  comprise  a  large  element,  at  least  one- 
half,  of  the  population ;  the  balance  are  also  con- 
cerned, but  not  so  directly. 


CHAPTERXV, 

COST   OF  RAILROADS   NOT   FULLY    CAPITALIZED— THE 
REASONS   WHY — EFFECT   ON   RATES. 

Rates  are  affected  much  more  sensibly  by  the 
expense  of  working  a  railroad  than  by  the  cost  of 
constructing  it.  But  in  so  far  as  the  latter  oper- 
ates, it  is,  in  the  United  States  at  least,  generally 
favorable  to  low  rates.  Cost  is  rarely,  if  ever,  fully 
capitalized. 

Many  i^eojDle  regard  a  railway  as  fully  completed 
when  opened  for  business.  To  such,  all  stocks  and 
bonds  issued  after  the  opening  are  thought  to  be 
fictitious.  These  people  are  as  sincere  as  they  are 
ignorant.  Others,  however,  make  such  charges  ma- 
liciously. Every  dollar  thus  added  to  the  capital 
of  a  railway,  the  latter  represent  as  "water;"  as 
having  a  reality  only  in  the  desire  of  the  proprietor 
to  make  the  community  pay  dividends  thereon. 
They  seek  to  make  it  appear  that  the  rates  of  rail- 
roads are  higher  than  necessary  to  afford  a  reason- 
able return  on  the  capital  actually  invested.  As 
proof  of  this  charge,  they  cite  isolated  instances. 

Some  excuse  has  been  afforded  for  these  charges 
in  the  general  neglect  of  railway  companies  to 
emphasize  in  their  accounts  the  distinction  between 
construction  and  operating  expenditures.  Failure 
to  capitalize  construction  expenditures  when  made, 

(281) 


282  R^'^IL  WA  T  RA  TES 

or  otherwise  definitely  locate  them  in  the  records 
and  returns  at  the  time,  renders  the  public  distrust- 
ful of  claims  subsequently  put  forward.  When  the 
owner  seeks  to  capitalize  his  investments,  the  com- 
munity has  ceased  to  remember  the  benefits  they 
conferred,  and  is  loth  to  acknowledge  its  justice. 
Much  of  the  misapprehension  of  the  public,  in 
regard  to  the  cost  of  railroads  and  their  capitali- 
zation, the  comi^anies  themselves  are  thus  responsi- 
ble for.  The  neglect  of  owners  to  caj^italize  their 
investments  at  the  time,  or  particularize  them  in 
their  returns,  does  not  presuppose  wrong,  nor  has 
any  followed,  except  to  the  owners. 

When  the  construction  charges  of  a  railroad  are 
embraced  under  the  head  of  operating  exx)enses,  it 
is  because  it  is  necessary  to  build  u]3  the  i^roperty 
in  the  confidence  of  owners  and  investors;  to 
strengthen  it  against  the  time  when  its  resources 
may  be  unduly  taxed.  It  is  a  simple,  practical  way, 
that  every  business  man  and  investor  understands. 
Because  of  this  necessity,  many  companies  have  not 
thought  it  necessary  to  separate  construction  from 
operating  expenses  in  their  reports.  The  returns  of 
the  Interstate  Commerce  Commission  requiring  con- 
struction charges  to  be  particularized,  will  remedy 
this  omission  in  the  future. 

Many  weak  companies  have  made  it  a  practice 
systematically  to  include  the  cost  of  additions  and 
imi)rovements  under  the  head  of  operating.  If  a 
railroad  was  unj)roductive  or  in  discredit,  its  owners 
bolstered  up  its  falling  fortune  by  using  net  recei^Dts 
to  add  to  property  account,  without  thinking  of  sub- 


AND  GOVERNMENT  CONTROL.  283 

sequent  caiDitalization.  Such  a  policy  can  have  but 
one  end.  If  the  property  should  ever  be  able  to 
earn  a  return  on  its  full  cost,  it  will  quite  likely  be 
I)revented  from  doing  so,  because  of  the  difficulty 
of  making  the  cost  aiDpear.  The  facts  will  not  be 
known,  or  if  known,  public  sentiment  will  forbid 
the  ca]Ditalization;  it  will  say  to  the  owner:  "Do 
you  want  to  rob  us  ?  We  know  nothing  about  these 
old  construction  accounts  you  seek  to  revive.  They 
are  nothing  but  'water.'  You  must  not  capitalize 
them  or  attemxDt  to  iDay  dividends  thereon." 

The  instances  where  a  company  is  obliged  to  dis- 
credit its  future,  by  suppressing  reference  to  its  con- 
struction work,  are  not  general.  They  will  grow  less 
frequent  with  the  development  of  the  country.  As 
we  grow  in  riches  and  acquire  greater  knowledge  of 
financiering,  capitalization  and  expenditure  will  go 
hand  in  hand.  But  there  will  always  be  more  or 
less  money  spent  for  construction  purposes  that  can 
not  be  capitalized.  The  limitations  of  accounts  are 
such  that  the  full  cost  of  a  property  can  never  be 
made  to  appear  on  the  books  of  a  company  or  in  its 
returns,  no  matter  how  desirous  the  owners  may  be 
that  it  should.  The  reason  is  well  known  to  those 
familiar  with  such  matters.  The  construction  ac- 
counts" of  a  railroad  are  peculiar.  In  many  cases, 
the  accountant  can  not  separate  that  which  comes 
under  such  head  from  that  which  comes  under  the 
head  of  operating.  When  this  is  so,  the  amount  is 
charged  to  the  latter,  or  mainly  to  that  account. 
However,  the  rule  is  not  universal.  It  is  probable 
that  items  have  been  charged  to  construction  that 


284  RAIL  WA  Y  RA  TE8 

were  known  to  belong  to  operation.  But  such  cases 
have  not  been  common  or  important.  They  are 
indefensible. 

The  accounts  of  railroads  are  incongruous.  Thus, 
many  items,  that  will  ultimately  represent  great 
values,  pass  on  to  the  books  at  merely  nominal  fig- 
ures. Other  amounts,  again,  that  represent  large 
expenditures,  will  prove  to  be,  in  the  end,  iDracti- 
cally  worthless.  Subsequent  adjustment,  however, 
is  impossible.  A  former  railroad  commission  of 
Wisconsin,  referring  to  the  cost  of  railroads,  says  '.'^ 
"The  elements  of  cost  often  include  exchanges  of 
value  under  every  possible  form,  and  under  all  con- 
ceivable circumstances,  with  no  record  preserved, 
except  of  the  nominal  sums  j)aid  and  received.  In 
original  railway  construction,  bonds  and  stocks  are 
exchanged  indifferently  for  labor  or  x)roi3erty;  some- 
times sold  for  money,  liyx)othecated  for  loans,  do- 
nated for  contingent  purposes,  divided  as  interest 
on  investment,  or  sacrificed  wholly  on  sale  and  fore- 
closure. Oftentimes  the  record  is  itself  wanting, 
and  even  nominal  amounts  of  investment  become 
the  subject  of  speculative  estimate."  Practices  such 
as  these,  coupled  with  a  lack  of  knowledge  of  ac- 
counts, in  the  early  history  of  railroads,  render  it 
impossible  to-day,  except  upon  a  few  railroads,  to 
determine  what  they  cost. 

In  the  early  days  of  railroads,  no  attempt  was 
made  to  properly  classify  construction  expenditures. 
Many  petty  items  of  construction  are  still  largely 

*  "  Wisconsin  Railroad  Commissioner's  Report,"  1874,  page  19. 


AND  GOVERNMENT  CONTROL.  285 

uni^rovided  for  in  the  returns,  and  will  always  remain 
so,  because  to  notice  them  would  be  to  greatly  increase 
expenses.  Money  is  saved  by  embracing  them  in 
©Iterating  expenses.  Both  principal  and  interest,  if 
capitalized,  would  not  equal  the  clerical  exi)ense 
that  their  separation  from  other  expenditures  would 
entail.  Only  items  of  considerable  magnitude,  such 
as  the  construction  of  buildings,  sidings,  new  roll- 
ing stock,  fences,  platforms,  yards,  etc  ,  are  gen- 
erally thought  worthy  of  being  embraced  in  the 
construction  account.  The  regulations  of  railroads 
on  this  point  are  substantially  alike.  Sometimes 
these  regulations  are  printed,  oftentimes  they  are 
only  verbal.  Upon  many  lines,  the  policy  of  charg- 
ing only  large  items  to  construction,  has  become 
a  settled  one.  Thus,  a  great  company*  explains  to 
its  emj)loyes  that  it  is  its  desire  "that  only  im- 
portant and  permanent  additions,  materially  in- 
creasing the  value  of  the  property,  are  to  be  charged 
to  construction." 

A  separate  account  should  be  kept  of  all  construc- 
tion work  that  does  not  involve  burdensome  clerical 
labor. 

A  separation  of  construction  accounts  from  oper- 
ation is  necessary  as  a  check. 

The  poverty  and  unproductiveness  of  railway 
enterprises,  and  the  risks  attending  their  operation, 
suggested  the  idea  of  merging  first  cost  w^ith  operat- 
ing expenses.  If  a  company  was  jDoor,  or  not  able 
to  earn  a  return  on  its  capital,  or  was  apprehensive 


*  The  Atchison. 


286  BAIL  WAY  HATES 

of  the  future,  little  regard  was  paid  to  keeping  con- 
struction separate  from  ordinary  working  expenses. 
Moreover,  in  early  days,  many  of  the  accounting 
officers  of  railways  had  only  crude  ideas  of  the  dis- 
tinction between  x^ermanent  expenditures  and  cost 
of  working.  The  result  is  apj)arent  in  the  accounts 
they  comj)iled.  Another  reason  was,  and  is,  the 
expense.  Separation  of  construction  exx3enditures 
from  cost  of  operating,  although  not  great,  is  so 
considerable  as  to  deter  accountants  from  attempt- 
ing it  in  small  matters,  unless  especial  reasons  exist 
therefor. 

Still  another  influence  has  operated  to  lessen 
the  apparent  cost  of  railroads.  Many  of  these 
properties  have  been  operated  at  one  time  or  an- 
other by  their  bondholders.  When  this  was  so,  the 
temptation  to  use  surplus  income  to  better  the 
property,  without  caiDitalizing  the  amount,  or  other- 
wise allowing  the  holders  of  deferred  securities  any 
return  thereon,  was  oftentimes  too  strong  to  be 
resisted.* 

Another  obstacle  in  the  way  of  accurate  account- 
ing is  the  opening  of  new  roads  before  they  are  fairly 
completed.  Construction  and  operating  ex^Denses 
are,  in  such  cases,  mingled  in  one  indistinguishable 
mass.  In  the  United  States  and  other  new  coun- 
tries, railroads  are,  as  a  rule,  opened  for  business 


*  It  is  not  to  be  inferred  from  this  tlisit  the  interests  of  such 
holders  eventually  suffered.  Quite  the  contrary.  Such  measures, 
while  dictated  by  purely  selfish  motives,  were  conservative,  and  in 
the  interest  of  the  permanent  good  of  every  class  of  holders.  Great 
corporations  are  thus  built  up  and  maintained. 


AND  GOVERNMENT  CONTROL.  287 

long  before  completion.  The  moment  the  track 
permits  the  passage  of  trains  at  nominal  rates  of 
siDeed,  flaming  advertisements  announce  the  opening 
of  the  line.  Many  influences  contribute  to  this 
haste.  But  the  principal  one  is  lack  of  capital;  a 
desire  to  make  the  j)roperty  earn  something.  This 
has  caused  the  opening  of  many  lines  that  otherwise 
would  have  remained  in  the  hands  of  the  contractors 
and  builders.  It  has  caused  the  acceptance  of  roads 
with  grades  so  abrupt  as  to  render  the  property 
worthless  for  many  purposes  to  owner  and  public  ; 
the  acceptance  of  tracks  barren  of  ballast,  laid  per- 
haj)s  on  the  unraised  earth  ;  of  light  iron  and  poor 
ties,  where  neither  should  have  been  used;  of  ditches, 
the  width,  slope,  and  depth  of  which  were  ridicu- 
lously inadequate ;  of  embankments  so  circum- 
scribed and  narrow  as  t©  barely  preserve  the  equi- 
librium of  trains ;  of  cuts  through  mountains  and 
hills  hardly  wide  enough  to  admit  the  passage  of 
trains.  It  has  caused  the  acceptance  of  pasteboard 
bridges  and  culverts,  giraffe-like  trestles,  inadequate 
yards  and  incomplete  platforms ;  the  opening  up 
of  roads  without  sidings,  fences,  or  signals,  illy 
equipped  and  more  illy  organized.  Upon  many  lines 
permanent  buildings  are  at  flrst  unknown,  aban- 
doned cars  and  rudely  constructed  sheds  serving  as 
offices  and  warehouses.  Nor  is  systematic  and  ef- 
fective effort  made  to  clear  the  right  of  way  from 
trees,  brush,  and  grass. 

Such  were  and  are  the  circumstances  that  attend 
the  opening  of  railroads  in  anew  country,  dependent 
upon  the  resources  of  its  citizens  to  provide  the 


288  -R-l^^  WA  Y  EA  TE8 

means.  In  Europe  more  formality  is  observed.* 
But  in  any  event  tlie  cost  of  a  railroad,  up  to  the 
time  it  is  opened,  is  only  partial.  In  a  new  country 
it  is  oftentimes  merely  nominal. 

No  greater  misapprehension,  it  is  i:>robable,  exists 
in  the  public  mind  ui)on  any  subject  than  that  about 
the  cost  of  railroads.  Its  effect,  from  an  economic 
point  of  view,  is  likely  to  be  very  serious  in  the 
future,  if  systematic  effort  is  not  'gnt  forth  to 
correct  it.  While  a  road  is  never  completed,  the 
community  looks  upon  every  line  as  practically 
finished.  Legislation  based  on  such  premises  can 
not  but  prove  unfortunate,  both  to  railroad  com- 
panies and  communities.  A  memorial  to  the  Wis- 
consin legislature,  designed  to  correct  public  opinion 
in  regard  to  the  cost  of  railroads,  says :  "  When  a 
road  is  graded,  laid  with  iron,  and  declared  open 
for  business,  the  popular  impression  is  that  the  work 
is  finished,  whereas  it  is  only  fairly  begun.  Con- 
siderable ballasting  and  surfacing  are  required,  and 
a  great  many  warehouses,  elevators,  and  station 
buildings  must  be  provided,  together  with  a  large 
amount  of  rolling  stock  and  numerous  other  facili- 
ties, before  much  business  can  safely  be  done.    Cuts 

*  Thus  in  Great  Britain  no  "railway  can  be  opened  for  tlie  public 
conveyance  of  passengers  until  one  month's  notice  of  the  intended 
opening  shall  have  been  given  to  the  Board  of  Trade  ;  and  if,  in  the 
opinion  of  their  inspector,  tlie  opening  would  be  attended  with  danger 
to  the  public,  the  Board  may  postpone  the  opening  for  one  monlh. 

.  .  .  The  Board  may  go  on  postponing  the  opening  from  month 
to  month  until  their  inspector's  requirements  have  been  complied 
with." — Royal  Com'n.  on  R'ys.  Report,  page  xxviii.  This  is  stated 
elsewhere. 


AND  GOVERNMENT  CONTROL.  289 

have  to  be  widened,  sidings  put  in,  bridges  and 
culverts  strengthened,  fences  built,  renewals  made, 
and  many  other  improvements  made  which  add  to 
the  cost  of  construction."  Every  defect  or  omission 
in  construction  must  be  made  good  afterwards. 
New  needs  must  also  be  provided  for.  Oftentimes 
the  credit  of  a  company  is  such  that  these  things 
must  be  deferred  for  many  years.  Its  only  resource, 
perhaps,  is  its  net  earnings.  It  has  no  standing  or 
credit.  Needed  imx)rovements  must  therefore  be 
made  from  revenue,  as  opportunity  offers.  The  in- 
centive to  keep  a  separate  account  of  construction 
outlay  is  lacking  in  such  instances,  and  without  this 
incentive  it  will  never  be  done.  A  comjoany  unable 
to  earn  a  fair  dividend  on  its  stock,  with  nothing 
encouraging  to  look  forward  to,  will  more  than 
likely  discontinue  further  charges  to  construction. 
Such  exjDenditures  ax^pear  like  a  reflection  on  the  man- 
agement. ' '  Why  throw  good  money  after  bad  'I ' ' 
the  stockholder  asks.  On  the  other  hand,  the  man- 
ager says,  "\\''hymake  further  charges  to  construc- 
tion, when  wt  are  unable  to  pay  on  what  we  have  ? 
Why  subject  ourselves  to  criticism  by  further  in- 
creasing our  proi^erty  account,  so  long  as  we  can  not 
capitalize  present  cost  ? ' '  Such  arguments,  of  course, 
ignore  the  fact  that  a  time  may  come  when  the 
property  will  be  able  to  pay  a  return  on  the  whole, 
and,  if  preparation  has  been  made,  will  be  allowed 
to  do  so.  Bat  business  men  reason,  and  rightly, 
that  the  needs  of  to-day  are  more  important  than 
the  possibilities  of  the  future. 
Few,  if  any,  American  railroads  have  earned  a 

19 


290  RAIL  WA  r  EA TE8 

fair  return  on  cost.  Some  of  them  earn  a  return  on 
their  capital.  But  capital  and  cost  travel  far  apart. 
Whether  the  railroads  of  the  United  States  will  ever 
be  financially  able  to  issue  shares  or  other  evidence 
of  cost  to  cover  unrepresented  values,  or  whether 
they  will  be  permitted  to  do  so,  if  able,  it  is  impos- 
sible now  to  tell. 

Of  all  accounts,  the  construction  account  of  a  rail- 
road is  the  most  difficult  to  keep.*  Only  those 
familiar  with  such  matters  know  how  difficult  it  is 
to  separate  construction  from  ordinary  working- 
expenses.  Trustworthy  returns  require  circum- 
stantiality and  accuracy,  and  accuracy  can  not  be 
expected,  except  aj^proximately,  as  a  large  number 
of  those  whose  duty  it  is  to  furnish  the  data,  possess 
no  knowledge  whatever  of  their  duty  in  this  respect, 
nor  aptitude  in  acquiring  it. 

In  renewing  and  improving  a  property,  many 
things  enter  into  cost  beside  the  princijDal  items  of 
labor  and  material.  Thus,  in  replacing  a  tempor- 
ary with  a  permanent  structure,  we  must  ascertain 
what  is  a  reasonable  charge  for  use  of  tools,  value 
of  implements  lost  or  damaged,  transportation,  use 
of  engines  and  cars,  superintendence,  accounting, 
etc.,  etc.,  and  when  the  work  is  done,  the  cost  of 
the  structure  replaced  must  be  deducted  from  the 
whole.  Many  items  entering  into  cost  of  con- 
struction are  so  mixed  up  with  operating  expenses 
that  they  can  only  be  approximated.  This  requires 
careful  analysis,  and,  in  many  instances,  exhaustive 

*  This  account  will  be  referred  to  more  at  length  and  particularly 
in  "  Railway  Disbursements  and  Accounts." 


AND  GOVERNMENT  CONTROL.  291 

researcli,  and  an  overhauling  of  returns,  at  once 
tedious  and  unsatisfactory.  The  expense  of  keep- 
ing an  accurate  construction  account  is  a  severe  tax 
upon  a  wealthy  company.  To  a  i)oor  corporation  it 
is  a  burden.  And  here  in  a  nut-shell  lies  an  expla- 
nation of  the  neglect  to  keep  such  an  account  in 
many  cases,  excei)t  for  costly  improvements.  And 
even  with  these  we  frequently  notice  lack  of  accu- 
racy in  important  particulars,  such  as  a  charge  for 
transportation,  use  of  tools,  compensation  for  equip- 
ment, superintendence,  etc.  Only  important  items 
are  picked  out;  the  others  are  disregarded.  A  vol- 
ume might  be  filled  with  explanations  of  the  influ- 
ences that  lead  corporations  to  suj)press  or  omit  a 
part  of  the  cost  of  their  x^i'oxDerties  from  their 
accounts.  One  more  must  suffice.  Those  familiar 
with  the  owners  and  managers  know  them  to  be  ex- 
tremely conservative.  They  are  intent  upon  build- 
ing uj)  and  strengthening  their  investment.  Like 
the  farmer  who  digs  a  ditch  or  plows  a  field,  they 
know  that  every  dollar  judiciously  expended  is  seed 
wisely  sown.  The  instinct  of  gain  and  caution  in- 
herent in  them,  and  to  which  they  owe  what  they 
have,  continually  urges  them  to  make  improvements, 
but  to  defer  caj)italization;  to  keep  such  exj)endi- 
tures  as  a  reserve — a  margin  against  contingencies. 
In  this  way  they  are  continually  adding  to  the 
security  of  their  j)i'operty  and  its  productiveness, 
without  adding  to  its  capital  representation.  Their 
sagacity  cannot  be  questioned. 

There  are  instances  where  those  who  represent 
railroads,  are  lacking  in  conservatism.     There  are 


292  BAILWAT  BATES 

reckless  men  among  this  class,  just  as  there  are 
among  bankers,  manufacturers,  merchants,  and 
hack-drivers;  men  eaten  up  with  the  desire  of  im- 
mediate realization;  men  who  can  not  await  the  pro- 
cesses of  time,  who  want  to  become  rich  at  once.  But 
this  class  constitutes  only  an  insignificant  minority. 
Its  antics  have,  however,  created  great  distrust  of 
railway  enterprises  generally;  it  is  so  much  more 
daring  and  conspicuous  than  the  better  element,  that 
it  attracts  attention  where  the  other  remains  forever 
unnoticed.  One  is  positive,  the  other  negative,  A 
drop  of  ink  is  sufficient  to  discolor  a  goblet  of  water, 
but  a  drop  of  water  will  occasion  no  change  what- 
ever in  the  asi^ect  of  a  like  quantity  of  ink.  And 
so  it  is  corresj)ondingly  with  these  classes.  One  un- 
stable man  will  cast  discredit  over  a  railway  enter- 
prise employing  fifty  thousand  men.  Writers  and 
others,  to  whom  the  public  look  for  guidance,  take 
advantage  of  these  anomalies  to  throw  discredit 
over  the  whole  railroad  world;  to  awaken  and  keep 
alive  a  feeling  in  the  community  that  it  is  unworthy 
of  trust.  The  result  is  mutual  want  of  confidence. 
Toothing  in  the  experience  of  men  is  more  interest- 
ing and  curious  than  the  attitude  the  peoj)le  and  the 
railroad  companies  preserve  toward  each  other.  On 
the  part  of  the  former,  it  is  one  of  aggression;  of 
accusation,  vituperation,  abuse  —  volley  on  volley. 
On  the  part  of  the  latter,  it  is  that  of  deference,  of 
explanation,  of  mild  exi)ostulation;  they  are  notice- 
ably careful  to  treat  their  traducers  with  forbearance 
and  courtesy.  Their  policy  is  to  temporize;  to  await 
the  sober  sense,  the  second  thought  of  the  people. 


AND  GOVERNMENT  CONTROL.  293 

It  is  quite  probable  they  have  carried  this  policy 
too  far;  that  they  have  been  much  too  deferential 
to  the  demagogues  who  harass  them;  have  offered 
too  little  resistance  to  acts  of  injustice  and  oppres- 
sion. Indeed,  their  timidity  has  oftentimes  been  so 
marked  that  it  has  suggested  attack — has  invited 
interference  and  oppression. 


CHAPTER   XVI. 

LOCAL  AT^D  THROUGH  TEAFFIC — STATE  VS.  ITTTER- 
STATE — IMPOSSIBILITY  OF  DISTINGUISHIISTO  ONE 
FROM  THE  OTHER — EFFECT  ON  LEGISLATIVE 
ACTION. 

The  accompanying  reflections  in  regard  to  State 
and  interstate  trafiic  are  suggested  by  the  divided 
duty  that  attaches  to  national  and  local  supervision 
of  railways,  and  the  impossibility,  in  many  instances, 
of  determining  where  the  jurisdiction  of  one  begins 
and  the  other  ends.  The  subject  attaches  to  govern- 
mental supervision  in  America,  and  in  other  coun- 
tries where  federal  and  State  authority  exist  side  by 
side.  It  also  treats  incidentally  of  the  inter-road 
traffic  of  railways.  The  theme  is  a  practical  one,  of 
interest  to  those  connected  with  railroads  or  con- 
cerned in  their  affairs. 


When  Percy  was  told  that  Glendower  could  call 
spirits  from  the  vasty  dee^^,  he  replied  that  he  could 
also  call  them,  but  would  they  come  ?  Legislation 
that  assumes  that  the  traffic  of  railroads  may  be 
classified  upon  the  basis  of  State  lines,  excites  in 
those  familiar  with  the  subject  a  feeling  of  incredu- 
lity akin  to  that  which  the  boast  of  Glendower  ex- 
cited in  the  breast  of  Hotspur.     It  can  not  be  done. 

(,395) 


296  BAILWAY  MATES 

State  traffic  refers  to  business  confined,  wholly 
within  a  State  ;  interstate  business  to  that  which 
passes  from  one  State  to  another.  The  difference  is 
simple  enough.  But  the  separation  of  the  two  is  as 
idealistic  as  calling  sx)irits  from  the  vasty  deep.  The 
incorporeal  spirits  that  hovered  around  the  romantic 
Glendower  were  not  more  incapable  of  sex^arate 
identity  than  State  and  interstate  business  in  many 
cases.* 

In  considering  legislative  supervision  of  inter- 
state traffic,  it  seems  not  to  have  occurred  to  those 
having  the  matter  in  charge  that  there  would  be  any 
difficulty  in  distinguishing  one  from  tlie  other.  But 
such  is  the  case.  The  traffic  of  a  country  is  homo- 
geneous. It  leaves  no  more  connected  or  recogniz- 
able trace  of  its  presence  or  methods  than  does  the 
swallow  in  its  flight  or  the  vessel  in  its  course;  it 
takes  no  more  account  of  State  lines  than  the 
winds  or  clouds  take  account  of  them.  It  has  no 
separate  identity,  except  in  the  private  practices  of 
individuals. 

The  difficulty  of  classifying  a  thing  so  intertwined 
and  indistinguishable  as  the  traffic  of  a  State,  is 
exx)erienced  in  all  countries.  It  is  an  inherent  diffi- 
culty, based  on  the  idiosyncrasies  of  men,  the  acci- 
dents of  business,  the  fluctuations  and  vagaries  of 
trade.  It  is  aggravated  by  the  peculiarities  of  rail- 
way construction,  location,  extent,  service,  traffic, 

*  This  indivisibility  will,  it  is  believed  by  many,  have  the  effect  to 
cement  the  relations  existing  between  the  officials  of  the  general 
government  and  the  State  governments;  will,  in  fact,  ultimately 
render  their  consolidation  necessary. 


AND  GOVERNMENT  CONTROL.  ^1 

arrangements  with  surrounding  lines,  the  talent, 
experience,  and  adaptability  of  those  who  operate 
them. 

I  will  enumerate  some  of  the  things  that  prevent 
a  separation  of  the  traffic  of  a  nation  on  imaginary 
or  arbitrary  lines.  And  first,  in  order  to  seimrate 
local  from  through  traffic,  it  is  essential  that  all  busi- 
ness (including  passenger  as  well  as  freight),  shall  be 
followed  in  the  accounts,  from  the  point  of  depart- 
ure to  the  place  of  final  destination.  Whenever 
this  is  not  done,  or  can  not  be  done,  the  separation 
will  be  doubtful  and  at  best  only  partial.  A  bag  of 
potatoes  consigned  to  a  merchant  at  Syracuse,  N.Y., 
shipped  from  Utica,  N.  Y.,  is  presumably  State 
traffic,  but  the  passenger  ticketed  from  Syracuse  to 
New  York  City,  while  apparently  local,  may,  in 
reality,  be  pursuing  an  uninterrupted  journey  to 
some  remote  State  or  Territory.  Herein  lies  the 
difficulty  in  a  nutshell. 

The  devices  of  railroads  for  handling  their  traffic 
are  such  as  their  necessities  impose,  coupled  with 
the  legitimate  requirements  of  business.  Each  road 
is  compelled  to  treat  the  bulk  of  its  traffic  as  an 
entity;  as  if  it  originated  and  terminated  upon  its 
line.  It  is  not  practicable  to  do  otherwise.  In  a 
country  of  restricted  territory,  like  that  of  Great 
Britain,  where  the  mileage  of  railroads  is  relatively 
small  and  communication  between  the  most  remote 
points  requires  but  a  few  hours,  it  would  seem  as  if 
traffic  might  be  billed  through  without  serious  risk 
or  expense  to  the  carrier.  But  it  can  not.  The 
exceptions  are  both  general  and  marked.     In   the 


298  RAILWAY  RATES 

United  States,  where  distances  are  great,  the  routes 
to  be  followed  complex,  and  the  vicissitudes  of 
tariffs  uncertain,  it  is  not  practicable  to  bill  either 
passengers  or  freight  through,  exceptt  over  particular 
systems  of  roads  located  within  restricted  territories, 
or  having  intimate  traffic  arrangements.  Business 
passing  beyond  terminal  i^oints  is,  as  a  rule,  re-billed. 
In  this  process  of  re-billing,  the  original  place  of 
shipment  is  lost,  or  whether  lost  or  not  the  effect  is 
the  same,  as  the  traffic,  from  being  interstate,  per- 
haps becomes  local,  or  vice  versa.  Nevertheless,  its 
nature  is  not  changed;  from  its  ]Dlace  of  departure 
to  its  final  destination  it  is  the  same.  The  accounts 
may  treat  it  differently,  but  this  fact  i)roves  nothing 
except  their  lack  of  adaptability,  their  inutility. 
Perhai)s  the  reader  will  say,  "  Change  the  methods 
of  handling  such  business,  then."  Unfortunately, 
this  can  not  be  done.  We  can  not  follow  the  details 
of  traffic,  any  more  than  we  can  trace  a  i^edestrian 
upon  our  streets  by  the  impress  he  leaves  ui)on  the 
granite  sidewalk.  Nothing  would  be  more  difficult 
than  to  ascertain  the  origin  or  destination  of  much 
of  the  business  of  a  railroad.  In  the  case  of  freight, 
a  careful  analysis  of  the  records,  laboriously  follow- 
ing each  shii)ment  from  one  point  of  billing  to 
another,  and  from  one  railroad  to  another  (where 
there  is  any  record  of  the  transfer  between  the  lat- 
ter), would  enable  us,  in  the  majority  of  cases,  to 
finally  ascertain  its  character.  But  this  is  no  more 
practicable  than  it  would  be  for  us  to  hold  our 
breath  while  the  air  about  us  was  being  analyzed  to 
determine  whether  it  was  pure  or  not. 


AND  GOVERNMENT  CONTROL.  299 

The  freight  traflfic  of  railroads  is  exceedingly 
cumbersome  to  handle.  The  accounts  are  equally 
cumbersome,  A  car-load  of  freight  going  from 
Cincinnati,  Ohio,  to  Cleveland,  Ohio,  may  be  billed 
through,  or  may  be  re-billed  several  times  en  route; 
with  each  re-billing  it  may  apparently  change  its 
character.  Moreover,  it  may  not  be  made  up 
wholly  of  one  consignment,  but  of  numerous  con- 
signments, partly  local,  i)artly  interstate.  In  bill- 
ing this  freight  no  distinction  is  made.  The  whole 
is  embodied  upon  one  sheet.  In  order  to  separate 
it,  we  must  examine  the  bill  in  detail.  That  which 
comes  from  or  goes  to  points  outside  of  Ohio,  is,  of 
course,  interstate  traffic;  the  other  may  be  local,  but 
not  necessarily. 

It  frequently  occurs,  however,  that  the  final  desti- 
nation of  traffic  is  not  given.  Whenever  this  is  so, 
its  true  character  is,  of  course,  not  distinguishable. 
One  case  is  sufficient  to  illustrate  this :  A  car-load 
of  horses,  consigned  to  Cleveland,  Ohio,  may  really 
be  destined  to  a  jDoint  in  Montana;  the  final  destina- 
tion not  being  given,  for  the  reason  that  the  transfer 
at  Cleveland  is  a  matter  that  the  owner  intends 
looking  after  himself.  He  does  not,  consequently, 
esteem  it  necessary  that  he  should  notify  the  carrier 
of  the  ultimate  destination.  Cases  of  this  kind  are 
of  constant  occurrence.  Instances  will  also  occur 
where  it  is  impossible  to  determine  the  origin  of 
a  business.  It  would  be  so  in  the  case  of  the  horses 
referred  to,  after  they  pass  Cleveland.  While  appar- 
ently originating  at  that  point,  they  perhaps  came 
from  Kentucky.     In  order  to  determine  whether 


300  RAILWAY  RATES 

freight  traffic  is  State  or  interstate,  it  is  necessary 
to  scrutinize  each  way-bill,  item  by  item;  to  trace 
each  shipment  from  point  to  point.  This  is  im- 
practicable, or,  if  performed,  leaves  the  work  still 
in  doubt,  from  the  imi)ossibility  of  ascertaining  the 
real  origin  or  destination  of  the  goods. 

The  difficulty  of  classifying  passenger  traffic  is 
even  more  marked.  A  very  large  percentage  of 
passengers  is  carried  upon  mileage  tickets,  that  may 
be  used  in  riding  from  station  to  station,  or  contin- 
uously over  thousands  of  miles  of  road.  Much  of 
the  property  transported  in  express  and  baggage 
cars  is  also  carried  upon  tickets  of  similar  form  and 
utility.  It  is  impossible  to  separate  business  of  this 
character. 

In  many  cases,  the  point  to  which  a  traveler  buys  a 
ticket  affords  no  clue  whatever  to  his  real  destination. 
Tlius,  a  iDerson  going  from  Chicago  to  New  York, 
will,  perhaps,  buy  a  through  ticket,  but  a  j)assenger 
starting  from  some  interior  point  in  Illinois  (at  a 
place  where  through  tickets  are  not  for  sale)  for 
New  York,  will  buy  a  ticket  to  Chicago  only.  Thus, 
he  will  aj)i3ear  as  a  State  passenger  for  the  first  part 
of  his  journey,  and  as  an  interstate  passenger  for 
the  last  part  of  it.  Yet  the  difference  in  the  nature 
of  the  ticket  he  travels  upon  does  not  change  his 
character  at  all,  and  neither  the  limitations  of  rail- 
way accounting  nor  legislative  enactment  can  make 
him  otherwise  than  what  he  is.  If  through  tickets 
could  be  sold  from  every  station  and  passengers  could 
be  made  to  buy  them,  it  would  simplify  matters  some- 
what; but,  unfortunately,  passengers  will  not  always 


AND  GOVERNMENT  CONTROL.  301 

buy  tickets,  and,  even  when  they  do,  will  not  al- 
ways buy  the  right  ones.  In  a  country,  moreover, 
where  there  are  thirty  thousand  \\T.dely  separated 
ticket-offices,  it  is  not  i^racticable  to  keep  tickets  to 
all  XDoints  for  sale  at  each  office;  accommodation 
could  not  be  i^rovided  for  them,  and  the  accounting- 
involved  would  be  of  so  voluminous  and  intricate  a 
nature  as  to  surpass  the  capacity  of  agents  and  the 
accommodation  and  financial  ability  of  carriers.  It 
is  the  general  custom  of  railroads  to  ticket  loassen- 
gers  between  all  the  great  centers,  no  matter  how  far 
apart,  or  how  many  lines  must  be  traversed.  This  is 
all  they  can  do.  But  this  is  not  feasible  with  freight. 
In  the  latter  case,  it  is  only  where  the  interchange  of 
traffic  is  very  great  that  jDroperty  is  billed  through. 
In  the  majority  of  cases,  it  is  re-billed  at  the  termi- 
nal point  of  each  line  or  system.  To  attempt  to  do 
otherwise  would  engender  delay,  create  misunder- 
standings, occasion  errors  in  rates,  create  confusion 
in  the  accounts,  and  add  greatly  to  the  expense  of 
doing  business.  Present  methods  are  the  only  prac- 
ticable ones.     No  great  change  is  possible. 

Such  are  the  mechanical  difficulties  of  the  situa- 
tion. Much  of  the  interstate  traffic  of  a  railway 
aiDpears  as  State  traffic;  much  of  the  interstate  busi- 
ness can  not  be  identified.  No  matter  how  conscien- 
tiously we  may  strive  to  make  the  separation,  the 
most  we  can  do  is  to  guess  at  the  nature  of  the  busi- 
ness, in  many  cases,  and  while  our  guess  may  be  of 
abstract  interest,  it  is  hardly  suitable  for  any  con- 
crete purpose. 


CHAPTER    XVII. 

MODERATION  EXERCISED  BY  WISE  GOVERNMENTS  IN 
MEDDLJNG  WITH  THE  RATES  OF  RAILWAYS,  AND 
IN  EXERCISING  THEIR  POLICE  POWERS — THE 
REASONS  THEREFOR — THE  STATUS  OF  RAILWAYS 
IN  ENGLAND,  CANADA,  AUSTRALIA,  GERMANY, 
FRANCE,  AUSTRIA-HUNGARY,  BELGIUM,  SPAIN 
AND  PORTUGAL,  ITALY,  RUSSIA,  AND  JAPAN. 

I  do  not  know  that  I  can  bring  this  vohime  to  a 
close  better  than  by  giving  a  brief  synopsis  of  the 
legal  status  of  railways  in  some  of  the  principal 
countries  of  the  world,  premising  my  statement  by 
saying,  that  while  every  government  reserves  more 
or  less  arbitrary  control  over  rates,  the  more  enlight- 
ened have  not,  heretofore,  as  a  matter  of  fact,  med- 
dled in  such  matters  at  all.  They  have  left  them 
wholly  to  those  who  own  and  manage  the  properties. 
This  has  also  been  true  in  regard  to  their  police  powers. 
They  have  not  interfered  with  rates,  nor  sought  to 
exercise  their  j)olice  rights,  except  in  urgent  cases. 
They  have  not  willingly  interfered  with  carriers, 
any  more  than  with  grocers.  They  have  sometimes 
found  it  necessary  to  do  so,  in  order  to  quiet  public 
apprehension,  or  answer  some  specific  case.  Every 
day  emphasizes  the  fact  that  governmental  inter- 
ference with  railroads  lessens  the  interest  and 
responsibility  of  owners  and  managers,  and  in  so 

(303) 


304  RAIL  WA  T  RA TE8 

far  as  this  is  so,  retards  i)rogress  and  lessens 
efficiency.  ^"0  government,  it  is  j)ossible,  has  exer- 
cised such  notable  restraint  as  Great  Britain,  An 
exception  to  this  rule,  however,  in  her  case,  is  the 
sentimental  efforts  of  the  English  government,  aided 
and  abetted  by  the  managers  of  many  English  rail- 
ways, to  throw  around  the  railroad  service  of  that 
country  a  theoretical  protection  out  of  all  x^ropor- 
tion  to  its  cost.  Enormous  sums  have  been  ex- 
pended to  render  crossings,  stations,  and  trains 
ideally  safe.  Protection  here,  as  elsewhere,  may  be 
carried  too  far.  It  may  have  the  effect  to  add  so 
much  to  the  cost  of  working  railroads  as  to  iDrevent 
them  doing  business  that  the  commercial  and  social 
good  of  a  country  demands.  It  has,  to  a  certain 
extent,  had  this  effect  in  Great  Britain.^'  Wherever 
public  opinion  is  allowed  to  dictate  the  protection 


*  When  a  pedestrian  is  injured  or  killed  on  the  streets  of  a  city, 
we  do  not  hear  the  cry  raised  that  the  roadway  should  be  elevated  or 
depressed.  Such  accidents  are  recognized  as  inevitable.  It  is  the 
same  with  railways.  Efforts  to  make  them  absolutely  safe  are  purely 
sentimental ;  as  senseless  as  an  effort  to  make  our  street  traffic 
absolutely  safe.  It  is  too  costly.  Cities  and  countries  that  indulge 
in  such  practices  can  not  compete  with  others  where  the  ordinary 
accidents  of  life  are  accepted  philosophically.  Nor  is  travel  likely 
to  be  rendered  more  safe  by  the  appointment  of  government  agents 
to  pass  upon  the  permanent  way  and  appliances  of  railway  companies. 
The  discredit  entailed  by  an  accident,  and  the  bills  for  damages,  are 
quite  sulHcient  to  force  a  company  to  exercise  every  reasonable  care 
and  precaution.  Carriers  are  much  more  likely  to  exercise  this 
precaution  if  the  responsibility  is  left  with  them,  than  if  taken  away 
and  vested  in  a  government  supervisor,  who  may  or  may  not  attend 
to  his  business.  Government  supervisors  are  very  well  as  a  corollary, 
as  an  advisory  adjunct ;  but  the  initiative  and  the  responsibility 
should  be  left  with  the  railroad  company. 


AND  GOVERNMENT  CONTROL.  305 

that  shall  be  thrown  around  the  railway  service,  it 
will  in  every  case  magnify  the  duty;  will  be  gov- 
erned largely  by  romantic  asj)irations  and  needs. 
In  its  efforts  to  x^rotect  every  one  from  harm,  it  will 
so  add  to  the  cost  of  doing  business  as  to  greatly 
restrict  traffic,  i^articularly  the  freight  business. 
This  last  it  will  not  see,  and  in  the  majority  of 
instances  will  not  consider  at  all.  It  will  not  remem- 
ber, if  it  ever  knew,  that  every  dollar  added  to  the 
cost  of  working  raih'oads  lessens,  by  just  so  much, 
their  ability  to  do  business;  lessens,  by  just  so  much, 
the  interchange  of  traffic;  lessens,  by  just  so  much, 
the  commercial  and  social  develo]pment  of  a  country; 
lessens  production  and  increases  cost.  No  business 
can  be  done  that  does  not  at  least  x^ay  the  expense 
of  operating;  consequently,  every  cent  added  to 
such  expense  increases  the  minimum  rate,  and  in 
so  far  as  this  is  so,  decreases  that  much  the  limit 
within  which  rates  may  be  made.  Interference  with 
the  operations  of  railways,  I  may  say  in  conclusion, 
while  it  may  apx)arently  be  helpful,  is  really  hurt- 
ful. A  glance  over  the  world  emphasizes  this  fact, 
and  it  is  superior  to  all  contrary  arguments;  namely, 
that  the  eountries  wherein  railways  have  been  al- 
lowed the  greatest  freedom,  have  been  meddled  with 
the  least  by  the  government,  have  made  the  great- 
est strides  in  wealth,  commercial  greatness,  and 
social  hax^piness.  The  general  laws  of  a  country  are 
quite  as  effective  to  x)rotect  a  people  from  railway 
corporations  as  they  are  to  protect  them  from  mer- 
chants and  manufacturers  generally.  There  will  be 
isolated  cases  of  wrong-doing,  just  as  there  are  cases 

20 


306  RAILWAY  RATES 

of  merchants  giving  short  weights  and  selling  an 
inferior  quality  of  goods.  But  such  instances  will 
not  by  any  means  be  general,  and  will  carry  with 
them  their  own  cure. 


THE  STATUS   OF   RAILWAYS   UNT   EISTGLAISTD. 

The  railway  question  has  received  the  close  study 
of  English  statesmen  ev^er  since  railways  became  a 
recognized  means  of  conveyance.  In  their  early  his- 
tory, when  railways  were  demonstrated  to  be  j^rac- 
ticable,  there  was  a  mania  for  their  construction. 
The  consequence  was  over-production,  and,  ulti- 
mately, a  financial  crisis.  This  was  in  1847.  After 
that  date,  the  English  Parliament  exercised  great 
caution  in  authorizing  the  construction  of  railways, 
requiring  always  in  advance  indisi^utable  evidence 
of  their  need.  This  control  of  the  government 
over  the  inception  of  new  railroads  is  a  marked 
distinction  between  the  American  and  English  rail- 
way systems.  Before  a  railway  can  be  constructed 
in  England,  the  government  requires  that  the 
scheme  shall  be  submitted  to  Parliament,  which 
examines  it  critically  and  in  detail,  and  considers  any 
objections  presented  by  x^arties  who  may  be  affected 
thereby.  The  points  upon  which  Parliament  re- 
quires to  be  satisfied  are,  that  the  road  is  a  public 
necessity,  and  will  tend  to  develop  and  improve 
interests  along  the  proposed  route,  and  that  the 
projectors  are  able  to  carry  out  their  plan  success- 
fully. If  Parliament  concludes  to  allow  the  con- 
struction of  the  proposed   road,  a  bill   is  passed, 


AND  GOVERNMENT  CONTROL.  307 

which,  in  addition  to  authorizing  the  construction 
of  the  road,  gives  the  railway  company  sjoecified 
powers  and  imposes  such  restrictions  and  conditions 
as  may  seem  equitable.  This  bill  incorporates  the 
company,  X)rovides  for  the  limited  liability  of  share- 
holders, j)rescribes  the  number  and  qualifications  of 
directors,  the  time  within  which  the  railroad  shall 
be  completed,  the  tolls  and  maximum  rates  of 
charges  for  passengers  and  freight,  etc.,  etc. 

Not  only  must  specific  authorization  from  Parlia- 
ment be  obtained  before  a  railway  can  be  con- 
structed, but  after  the  road  has  been  built,  it  can 
not  be  opened  for  business  until  sanction  has  been 
given  by  the  governmental  department  or  bureau 
known  as  the  Board  of  Trade.  Before  permission 
is  granted,  the  board  is  required  to  be  satisfied  that 
the  opening  of  the  road  will  not  be  attended  with 
danger  to  the  public  in  using  the  same,  by  reason  of 
the  incomx^leteness  of  the  works  or  permanent  way, 
or  the  insufficiency  of  the  establishment  for  work- 
ing such  railway.* 

When  once  the  sanction  of  Parliament  for  the 
construction  of  a  railway  has  been  given,  it  must  be 
completed  and  operated,  or  the  consent  of  Parlia- 
ment procured  to  abandon  it. 

The  Board  of  Trade,  so  called,  of  England,  is  really 
a  bureau  of  the  general  government.  It  possesses 
certain  supervisory  powers  over  rates  and  the  by- 
laws of  railways  regarding  the  conduct  of  their 
business. 


*  Railway  Regulatioa  Act,  1842. 


308  RAILWAY  BATES 

The  laws  of  England  provide  for  the  punishment 
of  railway  employes  who  are  guilty  of  misconduct, 
and  also  of  persons  obstructing  railway  employes  in 
their  duties,  or  trespassing  upon  railway  property. 

In  1844,  a  law  was  passed  which  provided  that,  if 
the  profits  of  any  railway  constructed  after  the  law 
came  into  effect,  divisible  ui3on  its  paid-up  capital 
stock,  equalled  or  exceeded  ten  per  cent. ,  the  gov- 
ernment should  have  the  power  to  revise  such  com- 
pany's tariffs,  so  as  to  reduce  the  divisible  profits  to 
ten  per  cent.  The  company  was,  however,  in  the  case 
of  such  revision,  to  be  guaranteed  its  ten  per  cent., 
and  revisions  were  not  to  be  allowed,  except  with 
the  company' s  consent,  of tener  than  once  in  twenty- 
one  years.  This  act  also  provided  that  the  govern- 
ment should  have  the  right  to  acquire  any  railroad 
constructed  after  its  date  by  purchasing  the  same 
for  a  sum  equal  to  twenty-five  years'  purchase  of 
annual  divisible  profits,  estimated  on  the  average 
annual  profits  for  the  three  years  iDreceding  the  date 
of  purchase.  If,  however,  the  average  profits  for 
such  three  years  had  been  less  than  ten  i^er  cent. , 
and  the  comi)any  thought  the  purcliase  price  based 
thereon  inadequate,  because  of  the  future  i^rospects 
of  the  proi^erty,  the  matter  was  to  be  referred  to  ar- 
bitration. Under  this  law,  however,  the  government 
was  not  empowered  to  take  branches  or  extensions 
of  old  lines,  constructed  after  the  date  of  the  act, 
unless  it  took  the  whole  system,  if  the  company 
required  it  to  do  so.  This  law,  so  far  as  it  relates 
to  the  government  acquisition  of  railroads,  has  never 
been  acted  upon.    Twenty- three  years  later  (in  1867), 


AND  GOVERNMENT  CONTROL.  309 

a  commission  appointed  by  the  government  to  report 
on  the  subject  stated:  "We  are  of  the  opinion  that 
it  is  inexj)edient  at  present  to  subvert  the  policy 
which  has  hitherto  been  adopted,  of  leaving  the 
constrnction  and  management  of  railways  to  the 
free  enterprise  of  the  people,  under  such  conditions 
as  Parliament  may  think  best  to  imj)ose  for  the  gen- 
eral welfare  of  the  j)ublic."  The  act  of  1844  also 
required  railways  to  kee^D  their  accounts  open  to 
inspection;  that  one  cheap  train  should  be  run 
daily;  that  facilities  should  be  granted  for  the  trans- 
mission of  mails  and  the  conveyance  of  troo^DS,  etc. 
With  the  growth  of  the  railway  system  in  Eng- 
land, and  the  necessity  that  arose  for  billing  business 
through  over  two  or  more  companies'  lines,  some 
of  the  railways  formed  an  association  among  them- 
selves to  facilitate  such  interchange  of  traffic.  It 
is  called  the  railway  clearing  house.  It  was  first 
formed  in  1847.  In  1850,  it  was  recognized  by  Parlia- 
ment and  a  legal  existence  given  it.  The  act 
incorporating  it  enables  the  body  to  sue  and  be 
sued;  j)rovides  that  any  railway  company  may  join 
or  retire  from  it  at  a  month's  notice;  and  that  any 
company  may  be  comj)elled  to  retire  at  the  request 
of  two-thirds  of  the  associated  companies.  In  it 
each  comi^any  is  represented  by  a  delegate;  the  del- 
egates constitute  a  committee  for  conducting  its 
business;  this  committee  is  empowered  to  adjust  all 
accounts  between  companies,  and  decisions  by  a  plu- 
rality of  votes  of  delegates  respecting  matters  of 
accounts  are  final  and  conclusive;  any  balance  due 
from  a  company  is  a  debt  to  the  committee,  for  the 


310  RAILWAY  RATES 

recovery  of  wliich  a  special  remedy  is  conferred  by 
the  act.  The  committee  is  required  to  keep  entries  of 
all  proceedings,  which  are  received  in  evidence  in 
any  suit  against  a  company  which  is  a  member  of 
the  association. 

In  1854,  Parliament  enacted  a  law  requiring  rail- 
ways to  afford  reasonable  facilities  for  forwarding 
and  delivering  traffic,  and  prohibiting  undue  or  un- 
reasonable preference. 

In  1868,  a  law  was  passed  requiring  railway  com- 
]3anies  to  prepare  and  print  half-yearly  statements 
of  account,  and  balance-sheets  and  estimates  of  pro- 
posed expenditures  of  capital  for  ensuing  half-years. 
These  are  required  to  be  filed  with  the  Board  of 
Trade,  and  copies  are  given  on  aj)j)lication  to  any 
person  financially  interested  in  the  company  to 
which  they  relate.  Under  this  law,  government  in- 
si)ectors  must  be  allowed  access  to  a  railway  com- 
pany's books  and  documents,  and  such  inspectors 
may  examine  officials  and  agents  under  oath.  The 
law  also  requires  passenger  fares  to  be  iDosted  at 
stations. 

In  1871,  it  was  enacted  that  the  Board  of  Trade 
should  api^oint  inspectors  to  make  inquiries  resj)ect- 
ing  railways  and  their  operations,  and  to  investigate 
accidents.  Such  inspectors  are  emj)owered  to  exam- 
ine a  company's  stations,  works,  buildings,  offices, 
stock,  plant,  permanent  way,  machinery,  etc. ;  they 
may  examine  officials  and  employes,  and  may  require 
the  i)roduction  of  any  books,  papers,  and  documents 
they  think  necessary.  Notice  of  all  accidents,  at- 
tended with  loss  of  life  or  personal  injury,  must  be 


AND  GOVERNMENT  CONTROL.  311 

sent  by  the  railways  to  the  Board  of  Trade;  also  of 
collisions,  in  which  a  x^assenger  train  is  involved; 
also  of  derailments;  also  of  accidents  of  any  kind, 
which  have  or  may  cause  loss  of  life  or  personal  in- 
jury. The  Board  of  Trade  is  required  to  inquire 
into  accidents,  and  make  formal  investigation 
thereof;  the  inquiry  must  be  conducted  i)ublicly, 
and  for  this  x^urpose  the  board  possesses  judicial 
X^owers.  Its  conclusions  and  rex3orts  thereon  must 
be  x^nblished. 

In  1889,  the  Board  of  Trade  was  given  authority  to 
order  passenger  railways  to  adopt  the  block  system;* 
to  provide  for  the  interlocking  of  switches  and  sig- 
nals ;t  to  use  continuous  automatic  brakes.:};  To 
meet  the  expense  of  this,  the  board  may  authorize 
railway  companies  to  issue  debentures  or  debenture 
stock,  bearing  interest  at  a  rate  not  exceeding  five 
per  cent. 

Railway  companies  are  required  to  furnish  the 
Board  of  Trade  periodical  returns  as  to  the  persons 
in  their  employment,  whose  duty  involves  the  safety 
of  trains  or  passengers,  who  are  employed  for  more 
than  such  number  of  hoars  at  a  time,  as  may  be 
from  time  to  time  named  by  the  board. 


*In  December,  1890,  the  percentage  of  doul)lc-track  road  used  for 
passenger  traftic,  operated  on  the  absolute  block  system,  was  98i  in 
England  and  Wales,  100  in  Scotland,  and  35  in  Ireland. 

fTlie  percentage  of  switches,  grade  crossings,  etc.,  properly- 
interlocked,  was  95  in  England  and  Wales,  87  in  Scotland,  and  65  in 
Ireland. 

X  The  use  of  continuous  automatic  brakes  on  passenger  trains  has 
been  made  compulsory  on  practically  every  mile  of  road  in  Great 
Britain, 


313  RAILWAY  RATES 

By  the  law  of  1889,  it  was  enacted  that  every 
passage  ticket  issued  by  a  company  should  bear 
upon  its  face,  in  legible  writing  or  in  j)rinted  char- 
acters, the  amount  charged  for  fare;  that  every 
passenger  should  produce  and  deliver  up  to  an 
officer  or  servant  of  the  company  his  ticket,  when 
called  upon,  or  in  default  pay  his  fare  from  the  place 
whence  he  started,  or  give  his  name  and  address. 
In  default,  he  could  be  fined  by  a  magistrate  and 
the  fare  recovered  by  the  company.  A  person  trav- 
eling, or  attempting  to  travel,  without  having  i^re- 
viously  paid  his  fare;  or,  having  paid  a  fare,  wil- 
fully proceeding  beyond  the  distance  for  which  he 
had  paid,  with  intent  to  avoid  payment,  or  failing 
to  j)ay  his  fare  when  requested,  can  be  fined  ten 
dollars  by  a  magistrate  in  the  first  instance,  and  in 
the  case  of  a  second  offense  may  be  fined  one  hun- 
dred dollars,  or,  in  the  discretion  of  the  court,  im- 
prisoned for  a  term  not  exceeding  one  month,  in 
addition  to  which  the  company  has  the  right  to 
recover  the  fare.  * 

In  addition  to  the  control  exercised  over  the  Eng- 
lish railways,  as  indicated  in  the  foregoing,  by  the 
Board  of  Trade,  an  act  of  1888  provided  for  the  ap- 
I)ointment  of  a  commission  consisting  of  two  com- 
missioners, one  of  whom  must  be  experienced  in  the 
railway  business,  and  three  ex  officio  commissioners. 
This  commission  has  jurisdiction  to  entertain  and 
adjudicate   upon    complaints  against   railways    of 

*  This  law  is  by  no  mcaus  a  dead  letter.  Its  provisions  are  rigidly 
enforced  by  the  railway  companies,  and  prosecutions  of  would-be 
defraudcrs  frequent. 


AKD  GOVERNMENT  CONTROL.  313 

anything  done  or  omission  made  in  violation  of  the 
law  requiring  railway  companies  to  receive  and  for- 
ward traffic  without  j)artiality  or  unreasonable  delay, 
and  to  grant  equality  of  treatment  where  railways 
oi^erate  steamshiios,  etc.  This  commission  is  em- 
XDowered  to  fix  terminal  charges;  has  control  over 
agreements  between  railway  and  canal  companies, 
etc.  It  also  has  power  to  direct  that  no  higher 
charge  shall  be  made  to  any  person  for  services,  in 
respect  of  merchandise  carried  over  a  less  distance, 
than  is  made  to  any  other  person  for  similar  services, 
in  respect  of  the  like  description  and  quantity  of 
merchandise  carried  over  a  greater  distance,  on  the 
same  line  of  railway. 


THE   STATUS   OF   RAILWAYS   11^   CAJ^ADA. 

The  present  status  of  railroads  in  Canada  is  em- 
bodied substantially  in  two  acts  of  Parliament,  the 
first  in  order  of  date  having  been  passed  in  1886, 
having  relation  only  to  the  sale  of  passenger  tick- 
ets. The  second,  which  is  comprehensive,  came  into 
operation  in  1888.  It  was  the  result  of  conclusions 
arrived  at  by  a  royal  commission  appointed  to  in- 
quire into  the  subject.  Its  conclusions  will  be  of 
especial  interest  to  the  American  reader,  because  it 
had  under  consideration  the  Interstate  Commerce 
act  of  this  country,  which  had  at  that  time  already 
come  into  operation.  In  reporting  to  Parliament,  the 
commission  in  question  thus  stated  its  conclusions 
in  reference  to  legislation  affecting  tariffs.  It  said: 
"  The  commission  have  carefully  considered  all  the 


314  BAIL  WAY  BATES 

information  before  them  on  this  important  subject, 
and  believe  the  interests  of  commerce  will  be  best 
served  by  leaving  the  arrangement  of  tariff  rates  for 
passengers  and  goods  in  the  control  of  the  several 
companies  respectively,  subject  only  to  a^^proval 
and  revision  of  the  maxima  rates  by  an  authorized 
tribunal."  In  regard  to  uniform  mileage  rates  (i.e., 
the  basing  of  rates  on  distance),  the  commission  said: 
""This  question  has  probably  given  rise  to  more  dis- 
cussion than  almost  any  other  j)oint  connected  with 
railway  management.  It  forms  the  subject  of  much 
of  the  evidence  given  before  the  commission,  and 
the  greatest  diversity  of  opinion  exists  upon  it.  It 
has  been  the  subject  of  rex)eated  legislation,  and  in 
the  celebrated  'granger'  agitation  in  the  West,  uni- 
formity of  mileage  rates  was  imposed  upon  the  rail- 
ways by  State  legislation.  The  subject  has  also 
received  the  greatest  attention  in  connection  with 
the  Interstate  Commerce  bill,  and  the  princii^le  of 
uniformity  of  mileage  rates  was  finally  sanctioned 
by  the  act,  reserving,  however,  to  the  railway  com- 
mission x)ower  to  suspend  its  operation  on  suflBcient 
reason  being  shown.  This  power  has  since  been  ex- 
ercised by  the  commission  in  certain  cases,  and  it  is 
not  now  imperative  on  all  railways  to  establish  uni- 
form mileage  rates,  under  like  conditions  and  in  the 
same  direction,  for  long  and  short  distances.  The 
reasons  given  for  the  suspension  of  this  section  of  the 
Interstate  Commerce  act  have  received  the  greatest 
attention  by  the  commission.  They  can  not  lose 
sight  of  the  fact  that  where  conveyance  by  water 
comes  into  competition  with  railways,  it  is  not  in  the 


AND  GOVERNMENT  CONTROL.  315 

public  interest  to  compel  railways  to  transport  freight 
at  uniform  mileage  rates,  as  it  involves  the  establish- 
ment, either  of  such  low  rates  as  render  the  local 
traffic  unremunerative,  or  such  high  rates  as  leave 
the  through  traffic  between  the  competitive  points 
wholly  at  the  mercy  of  carriers  by  water.  The 
public  interest  will  be  best  served  by  permitting 
rates  between  such  competitive  points  to  be  deter- 
mined by  the  respective  carriers.  It  is,  moreover, 
manifest  that  the  through  traffic  of  Canada  by  rail- 
way, which  the  commission  regard  of  the  utmost 
imi3ortance,  can  not  possibly  be  carried  on  except  at 
such  rates,  in  combination  sometimes  with  naviga- 
tion, but  more  generally  with  American  railways,  as 
would  be  utterly  inadequate  if  applied  to  ordinary 
local  traffic.  While  stating  their  ox^inion  that  the 
competition  by  water  and  rail,  from  almost  every 
important  business  center  in  Canada,  forbids  the 
adoption  of  uniform  mileage  rates,  the  commission 
have  not  lost  sight  of  the  alleged  unfair  treatment 
of  certain  localities  in  Canada  itself  by  railways. 
They  believe,  however,  that  such  cases  can  be  con- 
sidered and  relief  obtained,  under  the  powers  which 
they  hereafter  recommend  should  be  granted.  They, 
therefore,  recommend  that  it  is  inexpedient  to  adopt 
a  rule  of  equal  mileage  rates,  irrespective  of  distance 
and  cost  of  service." 

The  act  of  1888,  based  upon  this  commission's 
report,  provides  for  the  establishment  of  a  "Rail- 
way Committee,"  which  consists  of  the  minister 
of  railways  and  canals,  the  minister  of  justice, 
and  two  or  more  members  of  the  privy  council, 


31G  RAILWAY  BATES 

apiDoiuted  by  tlie  governor.  It  will  be  noticed  that 
this  body  is  made  uj)  entirely  of  politicians.  The 
commission,  in  recommending  a  bod  j'^  so  constituted, 
recognized  the  fact,  and  admitted  that  ' '  serious 
objection  may  be  taken  to  it,"  because  such  a  body 
must  "delegate  to  subordinates  much  of  their  im- 
portant work,"  and  because  "they  hold  their  office 
by  a  political  tenure  and  are  liable  to  sudden  change, 
whereby  the  value  of  their  experience  is  lost." 
That  they  "could  scarcely  be  regarded  by  the  pub- 
lic as  absolutely  removed  from  personal  or  political 
bias,  as  independent  members  of  a  permanent  tri- 
bunal." But  they  pleaded  that  the  body  was 
' '  necessarily  tentative,  and  it  seems  undesirable,  at 
this  time,  to  remove  its  operation,  in  its  inception, 
beyond  the  direct  criticism  and  control  of  Parlia- 
ment." 

The  Railway  Committee  thus  constituted  has 
power  to  regulate  and  limit  the  speed  of  trains,  and 
exercise  certain  other  police  powers  of  a  kindred 
nature.  It  has  power  to  inquire  into,  hear,  and 
determine  any  application,  complaint,  or  dispute, 
respecting  right  of  way,  changing  location  of  lines, 
construction  of  branch  lines  within  certain  limits; 
the  crossing  of  tracks,  by  different  comj)anies;  the 
alignment,  arrangement,  disposition,  and  location  of 
tracks;  the  use  by  one  company  of  another  com- 
pany's facilities;  the  construction  of  works  in  navi- 
gable waters;  the  construction  of  railways  on  and 
across  highways;  questions  as  to  compensation  for 
property;  tolls  and  rates  for  freight  and  passengers; 
tolls  and  rates  between  companies;  running  ^DOwers, 


AND  GOVERNMENT  CONTROL.  317 

or  haulage;  traffic  arrangements;  interchange  of 
freight;  unjust  XDreferences,  discrimination,  and  ex- 
tortion, and  any  matters,  acts,  or  things  sanctioned, 
required  to  be  done,  or  proliibited  by  the  law. 

Under  the  law,  railway  companies  are  authorized 
to  fix  and  regulate  rates,  but  it  provides  that  they 
shall  always,  under  the  same  circumstances,  be 
charged  equally  to  all  persons.  The  rates  for  large 
quantities  or  long  distances  may  be  proportionately 
less  than  for  small  quantities  or  short  distances,  if 
such  rates  are  under  the  same  circumstances  charged 
equally  to  all  persons;  but  in  regard  to  quantity  of 
freight,  no  special  rate  is  allowed  for  less  than  one 
car-load  of  at  least  ten  tons.  Railway  companies 
are  compelled  to  conform  to  any  uniform  classifica- 
tion of  freight  which  is  from  time  to  time  prescribed. 
Rates  must  be  approved  by  the  governor,  and,  with 
the  order  ax)proving  same,  must  be  published  in  the 
official  Canada  Gazette;  they  may  be  revised  by  the 
governor.  Railways  must  post  rates  in  their  offices 
and  at  i)laces  where  they  are  x^oUected.  Unjust  or 
partial  discrimination  is  prohibited,  but  discrimina- 
tion between  localities,  which,  by  reason  of  compe- 
tition between  water  or  railways,  it  is  necessary  to 
make  in  order  to  secure  traffic,  is  ^expressly  stated 
not  to  be  unjust  or  partial.  Secret  sxDecial  rates, 
rebates,  drawbacks,  and -concessions  are  i^rohibited. 

Arrangements  between  different  companies  for 
the  interchange  of  traffic  and  for  the  division  of 
rates,  etc.,  for  any  term  not  exceeding  twenty-one 
years,  may  be  made  by  the  companies  interested, 
but  they  must  be  made  with  the  consent  of  two- 


318  BAIL  WAY  RATES 

thirds  of  the  stockholders,  and  are  subject  to  the 
approval  of  the  governor.  Before  the  approval  of 
the  governor  is  given,  the  fact  that  he  will  be  ap- 
plied to  therefor  must  be  published  in  the  Canada 
Gazette  for  two  months. 

Facilities  for  interchange  of  traffic  are  to  be 
afforded  by  railroads  to  each  other,  and  they  are 
prohibited  from  exercising  unreasonable  i)reference 
in  such  matters. 

Railways  allowing  express  comj^anies  to  oj)erate 
over  their  lines,  must  grant  equal  facilities  on  equal 
terms  to  any  other  incorporated  express  company 
demanding  the  same. 

Railways  are  forbidden  to  buy  their  own  stock  or 
the  shares,  bonds,  or  other  securities  of  other  rail- 
ways in  Canada. 

Railways  are  required  to  make  annual  returns  to 
the  minister  of  railways  in  the  form  j)rovided  by  the 
act.  Each  railway  company  must  also  each  week 
prepare  returns  of  its  traffic  for  the  preceding  seven 
days,  in  the  form  provided  in  the  act,  and  file  one 
copy  of  same  with  the  minister  of  railways,  and 
post  another  copy  thereof  in  some  conspicuous 
place  in  the  most  XJublic  room  in  the  head  offices  of 
the  company,  so  that  it  can  be  i)erused  by  all 
persons. 

Railway  companies  are  prohibited  from  declaring 
dividends  to  be  paid  out  of  capital,  or  whereby  the 
capital  is  in  any  degree  reduced  or  impaired.  They 
may,  however,  until  the  railway  is  completed  and 
opened,  j)ay  interest  not  exceeding  six  per  cent,  on 
money  subscribed. 


AND  GOVERNMENT  CONTROL.  319 

THE  STATUS   OF   KAILWAYS   IIST   AUSTRALIA. 

The  railways  of  Australia  are  owned  by  the  vari- 
ous colonial  governments.  Their  management  by 
the  governments  was  very  unsatisfactory,  and  in 
February,  1884,  they  were  placed  under  the  direct 
management  of  a  commission  of  three  members  ap- 
pointed by  the  government.  These  commissioners 
hold  office  for  seven  years  and  are  eligible  for  reap- 
IDointment.  They  can  not  be  removed  except  by 
Parliament.  In  addition  to  management  of  exist- 
ing roads,  this  commission  has  charge  of  the  con- 
struction of  new  lines.  The  powers  and  duties  of 
the  commission  are  as  follows :  It  must  i^rovide 
j)roper  transportation  facilities  for  freight  and  j)as- 
sengers;  must  see  that  the  roads  and  the  service 
thereon  are  properly  maintained.  It  has  extensive 
]3olice  powers  over  the  railways,  their  i^roperty,  and 
employes;  it  regulates  the  terms  and  conditions 
under  which  special  trains  are  run;  fixes  charges  for 
warehousing  goods,  i)arcels,  and  baggage;  imposes 
conditions  on  which  baggage  will  be  carried;  im- 
IDOses  differential  and  special  rates  and  charges  for 
the  carriage  of  passengers  or  goods;  establishes  de- 
murrage charges;  makes  agreements  with  shippers 
for  insuring  them  against  loss  or  damage  on  freight, 
and  it  may  also  insure  the  government  against  such 
liability.  The  amount  of  the  government' s  liability 
to  sliippers  for  loss  or  damage  is  limited  by  law,  and 
action  must  be  brought  therefor  within  a  specified 
time.  The  commission  is  not  allowed  to  give  undue 
or  unreasonable  preferences,  or  subject  anyone  to 
undue  or  unreasonable  disadvantages;  it  must  afford 


320  RAILWAY  RATES 

reasonable,  proper,  and  equal  facilities  for  inter- 
change of  traffic  between  lines,  and  must  post  rates  at 
stations.  The  law,  in  relation  to  accidents,  is  similar 
to  that  of  England. 

The  commission  reports  to  Parliament  annually 
its  proceedings,  and  all  matters  of  interest  relative 
to  the  construction,  operation  and  equipment  of  the 
roads. 


THE   STATUS   OF   EAILWAYS   IN   GEEMANY. 

Railways  began  to  be  constructed  in  Germany  in 
1835.  Ninety  per  cent,  of  the  mileage  is  now  owned 
by  the  government.  Under  the  law,  the  govern- 
ment is  required  to  manage  the  railways  "in  the 
interest  of  general  traffic  as  a  single  system. "^^  It 
may  cause  the  construction  of  new  roads,  which 
must  be  equipped  according  to  standard  specifica- 
tions; it  has  power  to  enforce  uniform  traffic  and 
police  regulations;  it  must  keep  the  roads  in  good 
condition  and  equip  them  according  to  the  require- 
ments of  traffic;  it  must  provide  necessary  cars  for 
through  traffic  and  making  connection  with  other 
roads,  on  i)ayment  of  proper  compensation;  it  has 
control  of  tariffs;  the  government  determines  the 
standard  of  construction  and  equipment. 

The  railways  are  controlled  by  a  board  of  five 
members  known  as  the  "  imi^erial  railway  board," 
and  the  few  private  railways  are  controlled  by  State 
boards.  Private  roads  have  their  maximum  rates 
fixed  by  their  charters.     The  government  operates 

*  Article  42,  Constitutioa  of  German  Empire. 


AND  GOVERNMENT  CONTROL.  321 

all  file  railways  owned  by  the  State,  Rates  must 
be  published;  pools  are  recognized;  undue  or  un- 
reasonable preference  is  forbidden  in  regard  to  rates. 
In  regard  to  the  basis  of  rates,  a  writer  "^  says  :  "In 
Germany,  where  the  railways  are  almost  exclusively 
owned  by  the  State  governments,  and  interior  com- 
petition thus  minimized,  there  is  no  hard  and  fast 
rule.  The  short-haul  principle  is  accepted  as  a  gen- 
eral rule  in  Prussia,  but  exceptions  may  be  admit- 
ted by  the  minister  of  public  works.  The  Bundes- 
rath  of  the  empire  also  enunciated  the  same  princi- 
ple, but  expressly  inserted  the  j)roviso  that  particu- 
lar circumstances  might  justify  an  infraction  of  the 
rule.  These  exceptions  are  of  frequent  occurrence. 
The  short-haul  iDrincij^le  does  not  apply  to  through 
transit  rates,  to  import  or  export  tariffs,  or  to  any 
comiDetitive  centers  where  the  competition  is  caused 
by  water-ways  or  foreign  railways.  After  the  pur- 
chase of  the  Prussian  railways  by  the  State,  a  few 
years  ago,  the  attempt  was  made  to  enforce  the 
short-haul  rule  strictly,  but  it  failed.  A  large  num- 
ber of  special  rates  permit  charges  in  derogation  of 
the  short-haul  principle.  Even  the  earnest  defend- 
ers of  State  railways  confess  that  numerous  excep- 
tions are  indispensable. ' ' 

In  1886,  the  government  issued  a  code  of  regu- 
lations applicable  to  the  whole  railway  system  of 
Germany.  It  deals  with  the  condition  of  the  per- 
manent way ;  i^rovisions  requisite  for  bridges,  cross- 
ings, signals,  etc.;  the  construction  of  locomotives; 

*  Professor  Seligman,  Political  Science  Quarterly,  1887,  page  261. 
21 


332  RAILWAY  MATES 

the  testing  of  locomotives  and  tenders;  the  construc- 
tion of  rolling  stock,  with  specific  regulations  re- 
garding wheels,  tires,  axles,  etc.;  the  periodical 
examination  of  locomotives,  carriages,  and  wagons; 
the  weight  and  working  of  trains;  the  rate  of  sjDeed 
for  different  kinds  of  traffic;  the  movement  of  trains; 
the  conditions  of  working  fast  and  slow  traffic;  the 
transportation  of  passengers  on  freight  trains,  and 
vice  versa ;  communication  between  passengers  and 
conductors;  the  character  of  electric  communication, 
signals,  and  regulations  affecting  the  i^ublic* 


THE   STATUS   OF   EAILVV^AYS   IN   FRANCE. 

The  history  of  the  French  railway  system  is 
varied  and  complicated.  The  laws  and  regulations 
affecting  it  are  voluminous.  The  State  has  always 
actively  interfered.  There  have  been,  at  different 
periods  in  French  history,  lines  constructed  by  con- 
tributions made  in  part  by  the  general  government, 
in  part  by  local  districts,  and  in  part  by  private 
companies;  by  the  government  alone;  by  private 


*  The  government  officials  of  Germany  show  great  expertness. 
But  they  have  not  been  able  to  make  the  railways  conform  to  the 
comfort  and  varying  practical  needs  of  the  public.  Their  theories 
are  admirable,  but  their  practices  are  not  satisfactory.  They  are  not 
different  in  this  respect  from  government  servants  the  world  over. 
They  have  no  commercial  instincts,  and  when  called  upon  to  act 
in  cases  requiring  such  intuition,  respond  with  general  rules  and 
regulations  that  would  be  appropriate  enough,  perhaps,  to  army  or 
navy  life,  but  are  utterly  inadequate  to  the  needs  of  trade.  They 
meet  the  needs  of  commerce  just  as  they  drill  soldiers  or  provide 
pigeon-holes  for  letters. 


Aim  GOVERNMENT  CONTROL.  323 

companies  iinaided,  and  by  the  general  government 
and  private  owners  conjointly.  There  have  been 
leases  of  State  roads  to  j)rivate  companies;  surren- 
ders of  State  lines  to  i)rivate  companies;  competition 
between  State  and  x^rivate  roads;  schemes  of  na- 
tionalization, and  provision  made  for  governmental 
purchase. 

The  French  railway  system  dates  from  1842.  In 
that  year  an  act  was  passed  for  the  "  Establishment 
of  grand  lines  of  railroad."  The  lines  were  to 
diverge  from  the  capital,  Paris,  and  this  conception 
still  governs.  The  cost  of  construction  was  to  be 
borne  in  part  by  the  general  government,  in  part  by 
the  local  districts  through  which  the  roads  passed, 
and  in  jDart  by  the  companies  operating  them.  The 
latter  contributed  about  one-half  of  the  cost.  At 
the  expiration  of  a  given  period,  about  thirty-six 
years,  the  roads  were  to  become  the  absolute  proj)- 
erty  of  the  State.  This  latter  i^art  of  the  plan  did 
not,  however,  come  into  effect  because  of  the  finan- 
cial crisis  in  1847,  and  the  political  revolutions  in- 
tervening, which  stopped  railway  construction.  It 
then  became  necessary  to  make  new  arrangements, 
and  under  a  law  i)assed  in  1859,  the  State  assumed 
supervision  over  all  railway  construction;  it  also 
took  cognizance  of  rates.  This  act  forbade  discrimi- 
nation, and  under  it  the  French  railway  system 
became  of  a  dual  character — owned  partly  by  the 
State  and  partly  by  private  companies;  Under  this 
law,  it  was  provided  that  all  railways  should  be- 
come government  property  in  about  1950.  The  plan 
of  mixed  ownershixD  was  not  found  to  work  satisfac- 


324  BAILWAT  RATES 

torily.  Under  it  the  government  suffered  much  by 
the  competition  of  the  private  roads,  and  was  ulti- 
mately forced,  by  reason  of  such  competition,  to 
lease  to  its  rivals  such  parts  of  the  lines  as  were 
valuable  to  them. 

After  the  Franco-Prussian  war,  the  government 
contemplated  nationalizing  the  whole  railway  sys- 
tem, but  insurmountable  financial  obstacles  pre- 
vented, and  in  1883  the  situation  was  such  that  the 
government  was  compelled  i^ractically  to  surrender 
the  right  it  possessed  of  purchasing  private  roads, 
except  uj^on  prohibitory  terms.  Moreover,  at  this 
period,  also,  thegovernment  was  compelled  by  finan- 
cial considerations  to  cease  the  construction  of  more 
lines ;  to  cede  to  the  private  companies  such  roads 
as  it  had  recently  constructed,  and  to  authorize  the 
latter  to  construct  additional  lines. 

With  regard  to  railway  construction  after  that 
date,  the  arrangement  is  as  follows  :  ' '  The  com- 
panies undertake  to  contribute  a  si:)ecified  amount 
per  mile  towards  construction,  and  to  furnish  the 
rolling  stock,  and  the  furniture  and  fixtures  of  the 
stations.  The  remaining  expenses  of  construction  and 
equipment  are  to  be  ultimately  borne  by  the  State  ; 
but  in  the  first  instance  the  comx)anies  advanced  the 
money  for  the  State,  and  an  annual  payment  is  made 
by  the  State  to  the  companies,  to  meet  interest  on 
the  amount  of  advances,  and  to  create  a  sinking 
fund,  which  will  extinguish  the  principal  by  the 
time  when  the  concessions  of  the  comj)anies  ter- 
minate and  the  properties  vest  in  the  State.  The 
amounts  of   annual  payments  by  the  State  to  the 


AND  GOVERNMENT  CONTROL.  325 

comx)anies  on  account  of  moneys  advanced  for  new 
construction  are,  under  certain  circumstances,  liable 
to  be  diminislied  by  the  payments  made  by  the 
State,  under  its  guaranty  of  interest  and  sinking 
fund,  on  the  bonds  issued  by  the  companies  for  the 
extension  of  original  lines."* 

At  the  x^resent  date,  by  far  the  larger  portion  of 
the  French  railway  system  is  owned  and  operated 
by  private  companies,  each  company  serving  a  defi- 
nite territory,  and  being  comparatively  free  from 
competitive  lines. 

French  railway  legislation  has  provided  for  the 
l)ublication  of  tariffs  and  trafiic  regulations;  the 
railways  make  their  own  rates,  but  a  government 
bureau  reviews  them;  reductions  can  only  go  into 
effect  after  three  mon  tlis'  notice,  and  increases  after 
a  year's  notice,  exce^Dt  in  the  case  of  certain  inter- 
national traffic,  the  rates  on  which  can  be  changed 
on  twenty-four  hours'  notice,  or  under  certain  cir- 
cumstances, without  any  notice. 

Freight  and  passenger  traffic  are  divided  into 
classes  as  follows : 

Freight — Fast  freight  (grande  vitesse);  slow  freight 
(pepite  vitesse). 

Passenger — First,  second,  and  third  class. 

The  classification  of  freight  is  generally  based  on 
value,  but  is  subject  to  government  control.  Special 
rates  are  allowed,  subject  to  the  sanction  of  the 
government. 

*"  Fourth  Annual  Report,  Interstate  Commerce  Commission," 
page  340. 


326  R^IL  WA  Y  BA  TES 

THE   STATUS    OF    RAILWAYS    IJST    AUSTRIA-HUNGARY. 

In  Austria,  more  than  a  third  of  the  railways  are 
owned  by  the  government.  The  residue  is  owned 
by  private  companies.  Concessions,  or  charters  for 
the  construction  of  railways,  expire  at  a  stipulated 
period  not  exceeding  ninety  years.  Upon  their  ex- 
piration the  lines,  lands,  and  buildings  revert  to  the 
State,  but  the  equipment  remains  the  property  of 
the  company.  Before  a  railway  is  opened  it  must 
be  approved  by  the  minister  of  commerce.  The 
tariffs  of  State  roads  are  fixed  by  the  government; 
those  of  private  companies  are  subject  to  revision 
by  the  government  every  three  years,  and  the  gov- 
ernment has  power  to  reduce  rates,  if  the  net  earn- 
ings exceed  fifteen  per  cent.  In  most  cases,  the  max- 
imum rates  of  private  roads  are  fixed  in  their  char- 
ters, and  where  this  is  not  the  case,  the  government 
fixes  the  maximum.  Unjust  discrimination  is  pro- 
hibited and  publication  of  rates  is  required.  Special 
rates  are  allowed,  subject  to  the  approval  of  the 
government.  The  police  regulations  made  by  the 
government  for  the  roads  are  binding  ujDon  private 
companies.  The  government  is  empowered  to  exact 
any  information  it  requires  from  private  roads,  and 
each  road  must  keep  a  ' '  book  of  complaint ' '  at 
each  station,  in  which  patrons  may  enter  their  griev- 
ances. Private  companies  must  furnish  the  gov- 
ernment with  a  list  of  all  ofiicers  and  emi)loyes,  and 
must  keep  their  accounts  under  the  general  super- 
vision of  the  government. 

The  Hungarian  railways  are  owned  entirely  by  the 
State, 


Ayn  GOVERNMENT  CONTROL.  327 

Any  reference  to  the  railways  of  Austria- Hungary 
would  be  incomplete  without  referring  to  the  zone 
system  of  passenger  fares,  recently  adopted.  This  is 
a  departure  from  all  previous  methods  of  fixing  pas- 
senger fares.  Its  application  is  not  identical  in 
Austria  and  Hungary,  for  the  reason  that  the  rail- 
ways of  Hungary  are  owned  entirely  by  the  State, 
and  have  been  constructed  so  as  to  make  them  all 
tributary  to  its  capital,  Bnda-Pesth,  while  in  Aus- 
tria only  a  portion  of  the  railways  is  owned  by 
the  State,  and  some  of  its  most  important  lines 
have  no  direct  connection  with  the  capital,  Vienna. 
A  supposed  object  of  the  introduction  of  the  zone 
system  of  x)assenger  fares,  was  to  encourage  long- 
distance travel  between  the  capital  and  the  prov- 
inces; to  modify,  as  far  as  possible,  the  element  of 
distance  in  favor  of  the  traveling  public;  to  unify 
the  interests  of  all  sections,  and  promote  the  welfare 
of  the  capital  cities.* 

*The  zone  tariff  is  a  mechanical  device.  Government  officials 
who  meddle  in  commercial  affairs  always  affect  devices  of  this  kind, 
because  they  have  neither  the  experience  nor  skill  to  conform  to  the 
actual  needs  of  trade.  Government  officials  the  world  over  confine 
themselves  to  a  few  general  patterns,  which  everybody  is  expected  to 
use.  Thus,  if  a  man  happens  to  have  a  little  bigger  head  than  his  neigli- 
bor,  he  must  go  without  a  hat,  or  perch  it  on  the  top  of  his  head;  if 
his  head  is  a  little  smaller  than  his  neighbor's,  his  hat  will  drop  over 
his  eyes.  If  his  feet  are  long,  his  toes  will  stick  out  from  his  shoes; 
if  short,  his  shoes  will  curl  up.  The  efforts  of  government  officials 
are  constantly  directed  towards  the  reduction  of  mankind  into  a  few 
general  classes,  instead  of  considering  their  individual  needs.  And 
herein  is  the  difference  between  commercial  enterprises  carried  on 
by  owners  and  those  carried  on  by  the  government.  The  former 
listen  and  conform  to  the  needs  of  each  particular  patron.  On  the 
other  hand,  the  government  official  is  constitutionally  incapacitated 


328  RAILWAY  BATES 

The  Hungarian  zone  system  is  described  as  fol- 
lows :  "Each  railway  is  divided  into  sections, 
called  zones;  and,  all  the  railways  having  a  common 
center  at  Buda-Pesth,  the  zones  are  established  to 
and  from  that  center.  The  lirst  zone  is  shortest, 
extending  a  distance  of  twenty-five  kilometers  from 
the  starting-point;  the  second,  and  each  succeeding 
zone,  up  to  the  twelfth,  is  fifteen  kilometers  longer 
than  the  zone  immediately  preceding  it;  the  twelfth 
and  thirteenth  zones  are  each  twenty-five  kilometers 
longer  than  its  immediately  i^receding  zone,  and  all 
distances  exceeding  225  kilometers  from  the  starting- 
point  are  included  in  a  single  zone,  the  fourteenth. 
Passenger  rates  are  fixed,  not  per  mile  or  kilometer, 
but  at  so  much  per  zone,  the  charge  for  every  frac- 
tion of  a  zone  being  the  same  as  for  a  full  zone.  The 
effect  of  the  system  is  a  constantly  diminishing  rate 
]per  mile,  or  per  kilometer,  in  proi)ortion  to  distance 
traveled.  On  certain  classes  of  trains,  special  local 
rates  are  made  to  the  first  and  second  stations  from 
the  starting-point,  regardless  of  the  zone  system; 
also,  after  the  twelfth  zone  is  i^assed,  the  rate  per 
zone,  or  part  of  zone,  is  slightly  increased."  * 

from  studying  the  individual  needs  of  men,  and  in  those  cases  where  he 
is  not,  the  rules  and  regulations  that  surround  him,  prevent  him  making 
any  exceptions.  It  is  because  of  this  disposition  and  environment  that 
he  is  disposed  to  look  upon  the  efforts  of  common  carriers  to  satisfy 
the  individual  needs  of  patrons  as  unjust  discrimination.  Unhappy 
the  country  whose  commerce  is  hampered  by  the  meddling  of  govern- 
ment servants!  With  the  best  intentions  in  the  world,  coupled  with 
executive  talents  of  the  highest  order,  they  utterly  lack  the  adapt- 
able qualities  that  those  who  have  to  do  with  trade  must  possess. 

*"  Fourth  Annual  Report,  Interstate  Commerce  Commission," 
page  245. 


AND  GOVERNMENT  CONTROL.  339 

The  Austrian  zone  tariff  (which  differs  from  the 
Hungarian  for  the  reasons  given),  is  not  limited 
to  lines  radiating  from  the  capital,  and  the  rates 
are  measured  by  kilometers  as  before,  though 
this  measurement  is  modified  by  the  princix^le  of 
zones.  It  may  be  described  as  follows:  "The 
first  five  zones  from  the  starting-point  are  each  ten 
kilometers  in  length;  the  next  two  are  fifteen 
kilometers  each;  the  eighth  is  twenty  kilometers; 
the  following  four  are  twenty-five  kilometers  each, 
and  all  zones  above  the  twelfth  are  fifty  kilometers 
in  length.  From  the  starting-point  to  a  j)oint 
within  any  one  of  the  zones,  the  charge  is  at  a  fixed 
rate  per  kilometer  to  the  farthest  limit  of  that 

zone A  third-class  ticket  to  any  point 

within  the  first  zone  of  ten  kilometers'  length  is  ten 
kreutzers.*  .  .  .  The  average  rate  to  any  point 
in  the  second  zone  is  one  and  one-third  kreutzers 
per  kilometer,  while  the  rate  to  the  farthest  point 
of  the  zone  is  one  kreutzer  per  kilometer.  The 
average  rate  to  any  point  in  the  third  zone  is  one 
and  one-fifth  kreutzers  per  kilometer;  in  the  fourth 
zone,  one  and  one-seventh  kreutzers  ]3er  kilometer; 
in  the  fourteenth  zone,  one  and  one-eleventh  kreutz- 
ers per  kilometer.  The  charge  to  the  farthest  limit 
of  any  zone  is  always  at  the  rate  of  one  kreutzer 
per  kilometer,  "t 

*A  kilometer  is  3,280  feet;  a  kreutzer  is  ;il)out  four-tenths  of  a 
cent. 

f"  Fourth  Annual  Report,  Interstate  Commerce  Commission," 
page  348. 


330  RAILWAY  RATES 

THE  STATUS   OF   RAILWAYS   IN   BELGIUM. 

With  minor  and  unimportant  exceptions,  Belgian 
railways  are  owned  and  oj)erated  by  the  State.  The 
roads  not  now  owned  by  the  government  will,  under 
the  terms  of  their  charters,  ultimately  revert  to  it. 
Railway  affairs  are  administered  by  a  government 
department  of  "railways,  post  offices,  and  tele- 
graphs," under  the  laws  of  the  kingdom.  The  laws 
regulate  tariffs.  Railways  are  exempted  from  tax- 
ation. 


THE  STATUS  OF  RAILWAYS  IN  SPAIN  AND   PORTUGAL. 

The  railways  in  these  countries  are  owned  and 
operated  by  private  companies.  Most  of  them, 
however,  have  been  aided  by  the  government  by 
subsidies  or  guarantees.  Where  such  aid  has  been 
granted,  it  has  always  been  conditional  upon  the 
roads  reverting  to  the  government  in  ninety-nine 
years. 


THE  STATUS  OF  RAILWAYS  IN  ITALY. 

The  railway  problem  in  Italy  has  been  a  vexed 
one.  Speaking  of  Italy's  experience.  Professor 
Hadley  says:*  "Italy  has  tried  both  State  rail- 
roads and  private  railroads;  has  tried  almost 
every  possible  relation  between  the  State  and  the 
railroads.  Each  of  three  or  four  main  systems 
received  its  original  charter  from  a  different  govern- 


"  Railroad  Transportatioa,"  page  320. 


AND  GOVERNMENT  CONTROL.  331 

ment.  One  derived  its  being  from  the  Emperor  of 
Austria;  another  from  the  Pope.  Each  charter  has 
been  amended  over  and  over  again.  There  has  been 
State  assistance  of  every  kind — guarantees  of  inter- 
est, advances  of  capital,  subsidies  for  building,  sub- 
sidies for  running.  The  State  has  built  some  of  the 
roads;  others  it  has  bought  and  paid  for.  It  has 
tried  various  forms  of  management — direct  State 
action,  lease,  and  participation  in  profits." 

In  1878  a  commission  investigated  the  whole  sub- 
ject in  a  comprehensive  and  thorough  manner.  Its 
inquiries  were  not  simply  local,  or  confined  to  Italy 
alone,  but  extended  over  all  Europe;  it  spared 
neither  time  nor  expense  in  obtaining  information; 
its  labors  were  painstaking  and  comi)lete,  and  after 
working  assiduously  for  nearly  three  years,  the  re- 
sult of  its  labors  was  embodied  in  a  lengthy  report 
which  forms,  it  is  probable,  the  most  complete  work 
of  its  kind.  The  outcome  of  such  investigation  was 
decidedly  adverse  to  State  management,  as  pointed 
out  elsewhere  in  this  volume.  The  result  was  a  re- 
organization of  the  whole  railway  system,  and  the 
establishment  of  the  present  status. 

Prior  to  1859,  Italy  was  divided  into  small  States, 
each  one  of  which  had  its  own  system  of  lines,  if  it 
had  any  railways  at  all;  they  were  local,  independ- 
ent, and  isolated  in  tiieir  nature;  these  systems 
were  not  adapted  to  through  trafiic,  because  they 
ran  crosswise  through  the  country,  while  the  direc- 
tion of  through  trafliic  was  lengthwise.  In  course  of 
time,  political  events  brought  about  consolidation 
into  a  few  systems,  known  as  the  "Alta  Italia" 


332  RAILWAY  BATES 

(Upper  Italian)  and  ' '  Romane ' '  (Roman),  which  were 
directly  worked  by  the  State;  the  "Calabro-Sicule" 
(Calabria  and  Sicily)  worked  at  the  State's  exj)ense 
and  on  its  account  by  a  private  company,  which 
also  worked  on  its  own  account  another  system, 
called  the  "  Meridionale, "  of  which  it  was  grantee. 
In  July,  1885,  these  four  systems  were,  by  a  law 
of  that  year,  combined  into  three  systems,  divided 
according  to  their  longitudinal  sections,  in  order  to 
accommodate  through  traffic;  they  are  known  as 
the  "Mediterranean,"  the  "Adriatic,"  and  the 
"Sicilian"  systems.  In  order  to  bring  this  about, 
it  was  necessary  to  make  the  "Meridionale"  com- 
panj^  (a  private  one)  renounce  its  right  to  work  its 
lines.  This  was  done  by  an  arrangement  with  that 
company,  by  which  it  received  certain  subventions 
from  the  State,  and  was  given  the  management  of  one 
of  the  three  new  systems— the  "  Adriatic."  These 
three  systems  were,  on  1st  July,  1885,  taken  over  by 
private  com^^anies  under  contract  with  the  govern- 
ment. The  contracts  run  for  sixty  years,  with  an 
option  for  either  the  government  or  the  companies 
to  terminate  them  at  the  end  of  twenty  or  forty 
years,  upon  a  two  years'  notice.  The  companies 
jDurchased  the  rolling  stock  and  equipment  from 
the  State;  this  they  keep  in  repair  at  their  own  cost, 
as  an  operating  exi)ense,  but  they  receive  from  the 
State  annual  subventions,  equal  to  about  five  per 
cent,  on  the  investment  they  have  made  in  such 
rolling  stock  and  equipment.  The  provisions  made 
for  the  maintenance  of  the  roads  and  for  extraordi- 
nary expenditures  are  complicated.     A  number  of 


AND  GOVERNMENT  CONTROL.  333 

reserve  funds  are  provided.  A  certain  amount  per 
mile  of  track,  on  account  of  certain  contingencies, 
sucli  as  "extraordinary  repairs,"  "renewal  of 
rails,"  "renewal  of  rolling  stock,"  is  deducted 
j)eriodically  from  the  gross  receipts  and  applied  to 
reserve  funds  to  jprovide  for  these  exi)enditures. 
Increase  of  accommodations  or  sui)plies  is  provided 
for  by  yet  another  fund.  The  revenues  are  appor- 
tioned in  stipulated  x)ercentages.  Part  goes  to  the 
companies  for  operating  expenses  and  profits,  part 
to  the  State  as  the  owner  of  the  lines,  part  to  the 
reserve  funds  mentioned,  and  another  x^art  goes  to 
reimburse  the  government  for  its  annual  subven- 
tions. If  a  company  should  earn  suflS.cient  to  pay 
more  than  seven  and  a  half  per  cent,  profits,  one- 
half  of  the  excess  goes  to  the  government. 

Under  this  arrangement,  tariffs  are  made  generally 
uniform,  with  decreasing  rates  by  zones  of  fifty  and 
a  hundred  kilometers,  as  the  distance  run  increases. 
Special  tariffs,  however,  are  allowed  under  certain 
circumstances.  To  increase  tariffs,  a  new  law  is  re- 
quired to  be  i^assed  for  that  purx30se,  but  reductions 
may  be  made  by  agreement  between  the  companies 
and  the  State,  or  by  the  State  alone.  A  body 
known  as  "  Council  of  the  Tariffs,"  has  jurisdiction 
over  rates;  it  is  composed  of  delegates  representing 
the  State,  agriculture,  commerce  and  industry,  and 
the  railwaj^s. 

The  accounts  of  the  railways  are  under  the  super- 
vision of  a  government  inspector.  The  companies 
managing  the  railways  can  not  transfer  the  manage- 
ment of  their  properties,  unless  authorized  by  law. 


334  RAILWAY  RATES 

The  government  may  contract  with  the  comj)anies 
to  build  new  lines  upon  certain  terms.  Controver- 
sies between  the  conqDanies  and  the  State  are  settled 
by  arbitration. 


THE   STATUS   OF   EAILWAYS   IIST   EUSSIA. 

In  Russia  the  government  owns  and  operates 
about  one-third  of  the  railways  of  the  country;  the 
remainder  are  owned  and  operated  by  jirivate  com- 
panies. In  many  cases,  however,  the  latter  have 
received  aid  from  the  government  by  subsidies  or 
guarantees. 

The  State  railways  are  managed  by  a  board,  the 
members  of  which  are  a]Dpointed  by  the  govern- 
ment. This  board  supervises  their  financial  affairs, 
makes  rates,  etc. ,  and  in  its  general  powers  resem- 
bles the  directory  of  a  jDrivate  corporation.  Each 
State  line  has,  also,  its  general  manager  or  execu- 
tive officer,  and  is  administered  generally  on  the 
same  plan  as  a  private  railway;  should  the  ex- 
penses of  working  exceed  the  earnings,  the  govern- 
ment makes  appropriations  to  cover  the  deficit. 

Private  railroads  are  built  under  charters  granted 
by  the  government.  Before  granting  these,  it  re- 
quires to  be  convinced  that  the  road  is  in  the  public 
interest;  promoters  must  also  satisfy  the  govern- 
ment that  they  are  able  to  carry  out  the  construc- 
tion of  the  road,  and  when  once  a  charter  is  granted, 
the  road  must  be  constructed  within  the  time  s|)eci- 
fied  therein;  it  must  be  built  according  to  plans  and 
specifications  approved  by  the   government,    and 


AND  GOVERNMENT  CONTUOL.  335 

when  finished,  can  not  be  opened  nntil  the  work  has 
been  approved,  and  permission  granted  by  the  gov- 
ernment. Private  companies  can  not  transfer  their 
privileges  without  the  State's  consent.  Charters 
generally  specify  maximum  rates.  Rates  can  not, 
however,  be  changed  except  with  the  consent  of  the 
government.  A  "tariff  council"  exists  to  admin- 
ister the  law  regarding  rates.  The  government 
takes  cognizance  of  the  oi)erations  of  all  railroads, 
and  prescribes  rules  relating  to  construction  and 
maintenance,  both  of  permanent  way  and  equip- 
ment, signals,  speed  of  trains,  etc.  It  a^^iDoints  an 
inspector  for  each  private  railway,  whose  duty  it  is 
to  see  that  the  State  regulations  are  observed. 
When  a  j)rivate  road  receives  governmental  aid,  the 
State  is  represented  on  its  directorate  by  two  or 
more  members,  whose  recommendation  is  required 
for  all  expenditures,  declarations  of  dividends,  etc., 
which  must  also  be  approved,  by  the  government. 


THE  STATUS   OF   RAILWAYS   IN  .JAPAN. 

In  JajDan  there  appears  to  have  been,  up  to  1875, 
three  classes  of  railways,  namely,  "State,''  "Pre- 
fecture," and  "Village"  roads.  State  roads  are 
maintained  at  national  expense,  but  their  regula- 
tion and  repair  is  in  the  hands  of  the  prefectures 
through  which  they  pass.  Prefecture  roads  are 
maintained  by  equal  contributions  from  the  general 
government  and  particular  districts  or  prefectures. 
Village  roads  serve  petty  local  districts,  and  are 
maintained  at  their  expense. 


336  RAILWAY  RATES. 

In  1885  comparatively  extended  railway  construc- 
tion commenced  by  private  corporations,  and  in 
1887  the  government  promulgated  an  ordinance  en- 
titled, "Private  railway  regulations,"  which  pro- 
vides that  in  the  construction  of  railways  leave  must 
first  be  obtained  of  the  government  before  they  are 
built.  The  government  will  not  grant  this  permis- 
sion if  the  new  enterprise  will  interfere  with  any 
existing  railway,  or  there  is  no  local  necessity  for  it. 
If  satisfied  on  these  points,  it  grants  a  charter,  under 
which  the  construction  of  the  railway  must  be  com- 
menced within  three  months  and  the  work  com- 
pleted within  a  specified  time.  The  ordinance  re- 
lating to  railway  regulation  fixes  the  gauge  of  all 
railways  at  three  feet  six  inches,  and  no  company 
may  change  its  methods  of  working  without  per- 
mission. Rates  are  fixed  subject  to  the  approval  of 
the  government,  and  all  changes  of  time  for  trains, 
their  number,  etc.,  must  also  be  approved  by  it. 
When  a  charter  is  granted  for  a  limited  period,  the 
government  has  the  right,  at  its  expiration,  to  i)ur- 
chase  the  property  at  a  price  calculated  from  the 
average  price  of  the  shares  during  five  years  previous 
to  the  date  of  purchase. 


INDEX  TO  AUTHORITIES  QUOTED. 


PAGE 

Acworth,  W.  M.,  M.  A -.-.64,  71,  224 

"  The  Railways  and  the  Traders." 

Adams,  C.  F --- 213 

Alexander,  E.  P 74 

"Railway  Practice." 

Atkinson,  Edward -51,  61,  G3,  276 

"  The  Distribution  of  Products." 

Blanchard,  G.  R - 49 

"  Politico-Railway  Problems  and  Theories." 

Brewer,  Judge 112 

Cohn,  Professor - 87 

Colson,  C,  of  the  Government  Council  of  the  French  Railway 

Service --- 84 

Committee  of  State  Railroad  Commissions  and  Interstate  Com- 
merce Commission - 58 

Cooley,  Judge  T.   M.,  Chairman  Interstate  Commerce  Commis- 
sion  145,146,  154 

CuUom,  Senator  Shelby  M 250 

Curtis,  George  Ticknor --  81 

' '  The  Doctrine  of  Presumed  Dedication  of  Private  Prop- 
erty to  Public  Use." 

Dabney,  W.  D 42,  75,  111,  112,  113,  114,  115,  116,  123,  143,  145 

"  The  Public  Regulation  of  Railways." 

Depew,  Hon.  Chauncey  M 249 

"Die  Nation" - - 235 

Dorsey,  E.  Bates,  Member  Am.  Society  of  Civil  Engineers.. 157,  231 
22  (337) 


338  INDEX  TO  AXITIIOBITIES  QUOTED. 

TAGE 

Ely,  Professor  R.  T - ...245 

Farrer,  Sir  Thomas -- .-.233 

Findlay,  Colonel  George 141 

"The  Working  and  Management  of  an  English  Railway." 

Fink,  Albert 34,69,70,143,148 

Gournerie,  M.  de  la,  Inspector  General  (France) - 96 

Hadley,  Professor  Arthur  T - 

43,  44,  50, 51,  52,  76, 141,  218, 219,  220,  221.222,  226 

"Railroad  Transportation." 

Hale,  Edward  Everett.. 241 

Hudson,  J.  F 19,22,  23,40,99,  100,  102,107 

"  The  Railways  and  the  Republic." 
Interstate  Commerce  Commission,  First  Annual  Report 103,  128 

Second  Annual  Report 71 

Fourth            "         16,  39,  77, 97, 137, 138, 144,  256, 325,  328,  329 
Jeans,  J.  S 125,126 

"  Railway  Problems." 

Lansing,  George  L 35 

Lewis,  George  H -  33 

Miller,  Justice --245 

Nimmo,  Joseph,  Jr 38,41,215,  229,  243 

Perkins,  C.  E 59 

Royal  Commission,  1872 - -95,  118,  119 

Schoonmaker,  Augustus,  Member  of  Interstate  Commerce  Com- 
mission   -. — 146 

Seligman,  Professor 321 

State  Railroad  Commission  of  Michigan 54 

"  Report  of  1888." 
Stickney,  A.  B 62 

' '  Railway  Problem . ' ' 

Storrs,  Emory  A - --  37 

Swann,  John,  M.  A 61 

"An  Investor's  Notes  on  American  Railways." 
Taussig,  F.W 88,91,92 

"  A  Contribution  to  the  Theory  of  Railway  Rates," 


INDEX  TO  AUTHORITIES  QUOTED.  339 


PAGE 


Walker,  Aldace  F.,  Ex-member  Interstate  Commerce  Commis- 
sion, Chairman  Interstate  Commerce  Railway  Associa- 
tion  63,  147,  263,268 

Wisconsin  Railroad  Commissioners'  Report,  1874 284 

Woodman,  Edwin  E.. 57 

Paper  read  before  Engineers'  Society  of  St.  Paul. 


In  addition  to  the  foregoing,  the  writer  is  indebted  to  the  follow- 
ing gentlemen,  whose  views  on  questions  discussed  in  this  book  have 
been  profitable  to  him  in  elucidating  the  subject : 

Hon.  William  R.  Morrison, 
]VIr.  T.  B.   Blackstone, 
Mr.  Cornelius  Vanderbilt, 
Senator  John  Sherman, 
Mr.  Marvin  Hughitt, 
President  Harrison, 
Mr.  John  Newell, 
Senator  John  H.  Reagan, 
Mr.  J.  W.  Midgely. 


GENEEAL     INDEX. 


PAGE 

Accidents,  legislation  to  prevent 304 

Accounts  of  railroads .384-6 

Appliances,  mechanical  use  of,  by  carriers 16 

Australia,  government  management  in 228 

"  status  of  railways  in 319 

Austria,  status  of  railways  in 826 

Barter,  influence  of,  on  rates 67 

Belgium,  State  management  of  railroads  in 226 

"        status  of  railways  in 330 

Block  system,  use  of  in  England 311 

Board  of  Trade  (England)  duties  of 307 

Bounties,  policy  of  giving 194 

Brakes  (continuous  automatic)  use  of  in  England 311 

Canada,  status  of  railways  in 313 

Cape  Colony,  government  management  in 229,231 

Capital,  confidence  of,  necessary  to  commerce 8 

' '      return  on — relation  to  rates 31 

"      requirements  of.. 8 

Capitalization  of  railroads 281 

"  effect  on  rates.. 281 

"  proper  limit  of 181 

Carriers — see  also  "Railroads." 

"         ethics  of  their  trade 7 

Charters,  grant  of 167 

Classifications - 41 

"  relation  of  discrimination  to 44 

Combinations,  causes  of 52 

effectof 49 

Commerce,  natural  laws  governing 9,  10 

"         relation  of  special  rates  to '. 117 

(341) 


342  GENERAL  INDEX. 

PAGE 

Commission,  characteristics  of  a  valuable 183 

"  description  of  a  desirable 185 

"  value  of  an  impartial 182 

Community,  effect  of  over-construction  on 159 

' '  effect  of  unnecessary  railroads  on 188 

' '  injury  to,  by  unwise  legislation 10 

"  interest  of,  in  rail  way  construction...  160,  161,  273,  280 

"  prosperity  of,  dependent  upon  railroads - .      8 

' '  protection  of,  against  excessive  rates 89 

"  relation  of  carriers  to 72 

"  relation  of,  to  railroads 8,  176 

Competition,  effect  of - 

22,  50,  68,  81,  96,  114,  124,  156,  157,  160,  162,  168,  169 

"  effect  of  pools  on -.. 143 

"  extentof... --- 164 

"  fruits  of 23 

"  in  America 71 

"  in  Germany - _.     71 

"  influence  on  rates. 33,  34 

"  processes  of 134 

"  universality  of 50 

"  wastage  of 22 

Consolidation,  effect  of 49 

"  progress  of.. 191,  198 

Construction,   accounting  for 285,  290 

authority  for 154 

"  benefits  following 170 

"  causes -- --- 160 

cost  of.. 39 

"  excessive - -.- --  157 

"  expenditures  for 281 

free 150,  168,  171 

"  indiscriminate --. 166,  199 

"  practices  in  England 155 

"  unnecessary,  losses  through 170 

Consumer,  effect  of  rates  on 14 

' '         relation  to  rates. 38 

Consumption,  effect  of  rates  on 68 

Control,  government — see  "Government  Control." 

Co-operation,  necessity  of  in  commerce 27 


GENERAL  INBEX.  343 

PAGE 

Credit  of  carriers,  injury  to— effect  on  other  iudustries 7 

Criticism,  benefits  of. 29 

Crops,  failure  of— effect  of 7 

"     movement  of 26 

Discrimination 95 

"             basis  of 31 

."             definition  of 96 

"             elimination  of 22 

"            English  laws  regarding 125 

*'            French  experiences 126 

"            investigations  in  Europe 95 

"             limitation  of 51 

"             practice  of 24 

"            relation  to  classifications 44 

"             result  of  preventing 43 

Distribution,  relation  of  carriers  to 70 

Dividends,  expenditures  of  railways  for 12 

Earnings,  percentage  of  paid  for  labor 12 

Eminent  domain,  value  of  right  to  carriers 46 

England,  maximum  rates  in 128 

' '        opening  railroads  for  business  in  . . . , 288 

"        pooling  in.. 64 

"        practices  in 52 

"        railway  laws  of .._ 253 

' '        status  of  railroads  in 306 

Europe,  business  methods  of.. 221 

' '       government  management  in 239 

"        practices  in 43 

Expenditures,  construction _• 281 

"            operating 281 

"            relation  of  to  capitalization... 181 

Food  products,  rates  on 137 

France,  government  management  in. .239-41 

"        influences  governing  rates  in 84 

"        relation  of  railroads  to  government  in. 225 

"        status  of  railways  in 322 

Freights,  cheap — rates  on 98 

Germany,  government  management  in — 235,  249 

"  practices  in 71,73 

"         status  of  railways  in 320 


344 


GENERAL  INDEX. 


PAGE 

Government,  duty  of  toward  railways 183 

effect  of  interference  of 198 

control- 149,  205,  215 

effect  of - 205,  244 

practices  of  in  England 215 

reasons  for - .  237 

scope  of - 58 

when  necessary 243 

interference 44,  45.  53,  89,  121,  206,  217,  227 

"         advocates  of - 210 

"         grounds  for - 55 

' '         result  of 60 

"         with  rates 181 

management,  advocates  of 210 

' '  basis  of  _...- 223 

characteristics  of 207,  229,  280,  232 

"  effect  on  rates 230 

"  experiences  of 223 

"  objections  to 209 

"  reasons  for 224 

ownership,  characteristics  of 211 

disadvantages  of 241 

experiences  of 234 

in  United  States 236 

reasons  for 218,  241,  347 

when  advisable. ....237,  238 

prevention  of  unnecessary  roads  by 188 

service,  characteristics  of 226 

supervision 53,  215,  241 

"  advisability  of 182 

bestformof 216 

scope  of 149,171,173,  181 

value  of 182,  213 

employes,  characteristics  of 206 

transportation  by 48 

Governmental  regulations,  scope  of  beneficial 10 

Granger  agitation 186 

Hungary,  status  of  railroads  in 326 

Insurers,  railroads  as. -     83 

Interest,  expenditures  of  railways  for 12 


GENERAL  INDEX.  345 

PAGE 

Interference,  government — see  "Government  Interference." 

"  legislative 50,  193 

Interstate  Commerce  Commission 77,  110 

"  "  "  discretion  of -..  261 

powersof.. 267,268 

"  "  law,  description  of. 253,  260 

"    effectof... 268-70 

"  "  "    imperfections  of 268 

"  "  "    passage  of 197 

"  "  "    summary  of 264-6 

Italy,  effect  of  government  management  in 223 

"     status  of  railways  in 380 

Japan,  status  of  railways  in 335 

Justice,  denial  of,  to  railways — effect  of 7 

Labor,  basis  of  remuneration  of 30 

"      expenditures  of  railways  for -.     12 

Land,  disturbance  in  value — effect  of... -.      8 

Laws,  character  of,  affecting  railroads - 202 

"      (natural) — effect  of  interference  with 9 

"      (natural) — governing  commerce - .       9 

"     (general) — effect  of - 305 

"      restrictive — effectof - 27 

"     transportation. 42 

Legislation,  character  of— in  Great  Britain 257 

"  ill  considered,  effect  of  on  railways 10 

'*  natural  divisions  of -- --  254 

"  necessary - 200 

"         oppressive 196 

"  unwise — effectof 7 

Legislature,  right  of  to  control  rates 56,  151 

Lombardy,  State  management  of  railroads  in 227 

Long  and  short  haul... .113,114,260-3 

Maintenance,  cost  of — relation  to  rates 31 

Management,  government— see  "  Government  Management." 

"  improvident — effectof 7 

*'  unrestricted — beneficence  of 21 

Managers,  acts  of. 26 

"        beliefs  fostered  in  regard  to. 11 

"         capacity  of - - 158 

"         differencesin - 36 


346  GENERAL  INDEX. 

PAGE 

Managers,  discretion  of --  122 

*'         influence  on  rates - - --    44 

"        power  of. 70,  100 

Markets,  effect  of — on  rates - -  -     49 

Middleman,  relation  to  rates 38 

Monopoly,  possibility  of. 49 

Monopolies,  characteristics  of -- 163 

"         creation  of 23 

Necessaries,  cheapening  cost  of 24 

Operating,  cost  of -  -  - 39,  176 

"         cost  of  relation  to  rates .31,    40 

Over-production  of  railways,  effects  of -7,  176 

Owners,  railway - ---    21 

"  "        capacity  of 158 

"  "        characteristics  of --- 291-3 

"  "        methodsof 21 

"  "        relation  to  public - 184 

"  ' '        right  of  to  manage  their  properties 149 

Ownership,  government — see  "Government  Ownership." 

Panic,  monetary,  effect  of 8 

Political  economy,  laws  of,  applicable  to  railroads 172 

"  "         observance  of  its  laws  in  rate  making 13 

Pools 95 

"    compared  to  guilds 142 

"    effect  of 49,  103,  104,139,  178 

"     influence  of 22 

.   "    necessity  of -- 129,145 

"    practices  attending _ 143 

"    practices  in  England 141 

"    practices  in  Europe... 140,  221 

"    practices  of  governments 136 

"    preventive  of  rate-cutting 63 

' '     purpose  of .- 194 

"    relation  to  competition -. 143 

"     theory  of 135 

"    use  of  in  England 64 

"     use  of  in  United  States 65 

"     value  of. 1:9 

' '     value  to  railroads 135 

' '    value  to  the  public 135 


GENERAL  INDEX.  347 

PAGE 

Portugal,  status  of  railways  in 330 

Preference,  undue - 51 

Private  ownership,  value  of. - 215 

Prices,  eifect  of  competition  on - 135 

Producer,  effect  of  rates  on 14 

"         relation  of  to  rates 38 

Production,  effect  of  rates  on 51,     68 

Products,  relation  of  carriers  to 70 

Profits,  of  carriers - 23 

"     effect  of  on  rates - 31 

"      limitation  of 232 

"     relative -- 62 

"     relative  margins  of -- - -    35 

Property,  cost  of —influence  on  rates. 38,    40 

"         improvement  of - 12 

Public  opinion,  effect  of  on  rates - -  -  - 27,  216 

Quantity,  influence  of  on  rates 41 

Railroads,  accounts  of -- ---  284 

"         acts  of - - -  131 

"         agitation  against --. 101 

"         agreements  among  to  maintain  uniform  rates 44 

"         antagonism  to -- 116,  195 

"         as  consumers -- 273 

"         as  fixtures - -     90 

"         as  insurers - - 83 

"         as  monopolies -- 57,80,  163 

"         attacks  on - 174 

"         complaints  regarding - 52 

"         bankrupt --  179 

"         beneficiaries  of - - - 277,  278 

' '         business  of --- - 26 

•'         capital  invested  in. - 276 

"         capitalization  of- 281 

"         collusion  with  shippers 25 

"         combinations  of -.- 45,  133 

"         competitive  practices  of - 61 

' '         completion  of. - ---  281 

"         conditions  engendered  by -. 29 

"  "         necessary  for  maximum  usefulness  of 9 

consolidation  of - 133 


348  GENERAL  INDEX. 

PAGE 

Railroads,  construction  of — authority  for 154 

parallel _ 187 

costof 281,  286 

criticisms  of.. 51,  99,  102,  122,  129,  130,  150,  183,  190, 

191,  234,  245 

"         decision  of  Supreme  Court  affecting. 256 

"         demands  upon  45 

"         devices  of  for  handling  traffic 297 

"         disbursements  of 273,  274 

' '         discretion  of 103 

"         efEectof.. 151 

"  "    cost  of  on  rates 63 

"  "    injuries  to 7 

"  "    over-production  of 173 

"  "    fiscal  disturbances  on.. 7 

"         eificiency  of,  in  United  States 156 

' '         English — complaints  regarding 52 

"         expenditures  of 273 

"         federation  of 146 

"         fixtures 161 

"         forces  that  will  secure  their  equitable  management...     10 

"         free  construction  of 150 

"         government  aided.. 55 

"         growth  of  in  the  United  States 193 

"         impartiality  of _-- 19 

' '         improvident  management  of — effect  of... 7 

"         income  of 152 

"         inconsistencies  of 150 

"         incorporation  of 254 

' '         indiscriminate  construction  of 199 

"         influence  of  law  of  supply  and  demand  on 172 

"         injustice  to — causeof 13 

"         instincts  of 137 

"         interest  of  community  in 280 

' '         laws  governing 270 

legislation  for '.. 10,70,  179 

"         legislation  in  Great  Britain 257-8 

"         limitation  of  territory  of 156 

"         lines  that  should  be  built 153 

local  business  of 78,  194 


GENERAL  INDEX.  349 

PAGE 

.        -  153 

Railroads,  locationot - .g2 

<<  «<         by  governments 

..  "  in  United  States..- 155,166 

low  rates  of  American - --  ^^^ 

"         maintenance  of 

managed  by  public  servants 

management  of —characteristics  of '^ 

means  of  crippling - - -^^    ^^^ 

"         methodsof- - '  150 

"         multiplication  of - ^^^ 

mutuality  of  interest  in ^^^^ 

"         opening  for  business - ^^^ 

"         operations  of "  ^gg 

over-production  of 

..  a  *<■  concomitants  of -- ^'^ 

,,  <«  "  effect  of ' 

.  .161,  275 

«'         permanency  ot - ^,.^ 

P«^^^«^; 23,"39",  289 

"         profits  of- - - 28 

prosperity  of--- "^"  ^^g 

principles  governing '  ^^g 

productiveness  of --- 

proper  scope  of  laws  regulating ^^^ 

"         purposeof- " "'     gg 

rate  making  power  of - ^^^ 

relation  of  owners  to  public --- --- 

n  «'         to  community ' 

"    'y:"''^ - v.i76;2oi 

«  "         totrade ' 

.      .  ~  *o 

"         restriction  ot  - ^g„ 

result  of  natural  laws - -^  ^^^ 

'«         rivalryof " '     ^g 

serve  particular  districts - - ^^ 

shortcomings  of ^^^ 

spirit  that  animates - ^^ 

State  aided - ""  ^^^ 

State  laws  governing '^^^ 

"         statusof oAo 

"      in  different  countries-- ^"^ 

K  "      in  Australia 


350  GENERAL  INDEX. 

PAGE 

Railroads,  Status  of ,  in  Austria ..  326 

in  Belgium 330 

"  "  in  Canada 313 

"  "  inEngland 306 

in  France-- -.  322 

"  "         inGermany- 320 

"  "  in  Hungary- 326 

in  Italy 330 

"  inJapan 335 

"  "  in  Portugal 330 

"  "  inRussia- - - .334 

"  "  inSpain 330 

"         strong- - - 179 

"         strong  «e?'s?/s  weak 144 

"         tenure  under  the  law 253 

"         through  business  of -. 194 

' '         travel  on - --  152 

"         treatment  of  in  United  States 198 

"         universality  of - 10 

' '         unnecessary - 149 

"  "  construction  of 170 

"  effectof ----153,165 

unproductive 158,  186 

"         unremunerative,  effect  of - 17,  90 

' '         value  of  eminent  domain  tO-- 46 

"  "       private  ownership-- 205 

' '         wastage  of  resources 199 

weak --- 179 

"         weakness  of-.. - - 194 

wealth  of - -  150 

Rate  cutting 36,  137 

Rate-maker,  discretion  of -  -  _ — 38 

"  qualifications  of  _  - — 66 

Rate-making,  essentials  required  in 58 

Rate  wars .130 

' '         cause  of- 147 

effectof 137 

Rates,  ability  to  heighten 73 

"      American  railway 52 

"      arbitrary  reduction  of 134 


GENERAL  INDEX.  351 

PAGK 

Rates,  as  tolls. - - ^ 

' '      based  on  averages - ^" 

«'  "       distance --- - ^^ 

"      bases.of. - -.13,37,  83 

"      carriers' right  to  change  at  will 28 

"      compared  to  taxes - -     °' 

"      competitive - - - -  ^^^ 

'♦      complaints  regarding -- - ^^ 

cost  as  a  basis 19,  H  83,  220 

"      cutting  of --- - --     6^ 

"      differential ^^ 

"      discriminatory - ..67,  95,  97,  123,  127 

"      duty  of  determining ---  1^0 

effect  of  economy  of  operation  on 229 

"  "        arbitrary  changes  in --       9 

"  "        cost  of  carriage  on - 91 

"  "  "      property  on 63,     85 

"  "        government  making 198 

•  '  "  "  management  on 219,231 

low. 26 

"  "        normal  conditions ^"^^ 

"  '■        pools  on 1^" 

««  "        public  opinion  on --     27 

"  "        supply  and  demand  on - -     85 

"  "        value  of  product  on - -    40 

"      enforced  reduction ^'' 

"      enforcement  of --- ^4* 

"      equitable,  means  of  securing - 232 

"      essentials  of - -- "^ 

"      evolution  of - - ^° 

1QQ 
"      excessive - ^"^ 

"      fluctuationof -21.    63 

"      force  employed  in  determining - 180 

' '      government  interference  with -  - 1°1 

' '      fair,  importance  of - -  1^2 

"      influences  affecting - - 13,37,     83 

•'      influence  of  barter  on 67 

"  "  competition  on 23 

'♦  "  water  routes  on ^ 

"  "  quantity  on - 41 


\ 

352  ^  GENERAL  INDEX. 

PAGE 

Rates,  influence  of  risk  on -  - .     83 

"  "      on  cost  of  railroads -..   .  17 

"  "  operating  expenses  of  railroads 17 

"      laws  that  fix..- •- 14 

"      local. 78 

"      low. - 104 

' '      lowering,  cause  of 27 

"      maintenance  of 145 

"      maximum _... 24,  40,  123 

' '      minimum 158 

"      moderation  of  wise  governments  in  meddling  with 303 

' '      principles  governing,  conditions  affecting 83 

"  "         underlying. 215 

"      raising,  cause  of 26 

"      reasonable- -.. ...-14,  18,  45,  199 

"      reductionsin 26,  73 

"      reduction  of,  by  Interstate  Commerce  Commission 138 

"      relation  of  people  to 42 

**  "  to  service —     16 

"  "     to  cost  of  property . 38 

"  "         cost  of  maintenance 31 

*'  "         cost  of  operating- - 31 

"  "  markets- 32 

"  "  products 35 

"  "  return  on  investment 31 

"      remunerative 18 

"      requisites  of 61 

"      right  of  legislature  to  control 56 

to  fix..- 151 

"      special 22,  35,  26,  67,  95,  117 

"  "       necessity  of-- 54,  120 

"  "       justice  of 120 

"  "       objections  to 126 

"  "       purpose  of 120 

"      stable,  value  of - 136 

"      system  for  formulating 172 

"      tendency  of  in  United  States ,-  139 

"      undue  reduction  of,  effect  of 175 

"      uniform 32,  69,  102 

"  "       maintenance  of 44 


GENERAL  INDEX.  353 

PAGE 

Kales,  unjust 49 

"      universality  of  their  effect 14 

unremunerative 115 

"      valueof 88 

"  "       service  as  a  basis 30,  73,  83 

"      what  they  represent 48,  65 

Receivers,  practices  of. 244 

Revenue,  railway,  collection  of . . . . .   11 

"  "         disbursement  of 11 

"         uses  to  which  put 11 

"        surplus  to  build  other  lines. 172 

Risk,  influence  on  rates 83 

Russia,  status  of  railways  in 334 

Safety  appliances 304 

Service,  cost  of,  effect  on  rates 98 

' '       relation  to  rates 16 

"        requirements  of  the  community 16 

"        unit  of 58 

' '        value  of 73 

"  "       as  basis  for  rates. .30,  37 

South  Africa,  government  management  in 229 

Spain,  status  of  railways  in. 330 

Special  rates — see  "Rates,  Special." 

Standard  Oil  Company 19,  20 

State  laws 270 

Stock,  "watered  " 63 

Strikes,  effect  of 8 

Supplies,  expenditures  of  railways  for 12 

Supply  and  demand,  effect  of  on  rates 44,  86 

"  "         law  of — how  far  applicable  to  railroads..  172 

Switches  (interlocking),  use  of  in  England 311 

Tariff,  construction  of  first 18 

"       zone. 327 

Tariffs,  printing  of 117 

Taxes,  rates  likened  to -43,  87 

"       expenditures  of  railways  for 12 

Tolls,  rates  compared  to 48 

Trade,  ethics  of - --      "^ 

"       interference  with,  result  of 8 

' '       relation  of  railroads  to 201 

23 


;354  GENERAL  INDEX. 

PAGE 

T  ruffic,  cheap 43 

' '       classification  of 295 

•'       competitive 134 

devices  for  liaudliug 297 

"       division  of 295 

' '       equities  of 197 

expenses  of 91 

freight 299 

higli  class 43 

how  to  be  considered 68 

indivisibility  of 296 

' '       interstate 295 

"       local- 295 

"       maximum 158 

' '       passenger 300 

' '       separation  of  local  from  through 295 

"  "  State  from  interstate -- . 295 

State 295 

through- . 295 

"       what  it  will  bear 43 

Transportation,  a  commodity 59 

cost  of... ...19,83,91,92 

"  principles  of 61 

"  relation  the  community 161 

"  varied  character  of 37 

Unit  of  service 58 

War  on  private  interests,  effect  of 149 

Wars,  rate ..130 

Water  transportation. 57 

Watered  stock 63 

Zouetarifl' 327 


Established  1872. 
THE  ORIGINAL  COMPANY  IN  THE  UNITED  STATES. 

The  Guarantee  Company 

OF    NORTH    AMERICA. 

Conducted  under  a  Management  uf  over  Thirty-Five  Years'  Exporicncc 

TOTAL  ASSETS,       -       $744,402.84. 

Bonds  of  Suretyship,  No  Other  Business. 


HEAD   OFFICE,    MONTREAL. 

President,  SIU  ALEX.  T.  (JAI.T. 

"Vice-President  and  Managing  Director,  EDW.XRD  It.WVLINGS. 

CHICAGO. 

Directors:  (.,.  .1.  OAGE,  President  First  N.-itional  Bank. 

11.  K.  CABLE,  President  Clii.,  K.  I.  &  I'ac.  P.  R. 
HON.  J.  RUSSELL  JOXES.  Ex-President  West  Side  Rr. 
C.  T.WHEELER,  Ex-President  Continental  National  Bank. 
W.  D.  PRESTON.  Cashier  Metropolitan  National  Bank. 

BRANCH   OFFICE,   175    LA  SALLE   ST. 

Secretary  and  Attorney,  JOHN  R.  PRUYN. 


United  States  Guarantee  Company. 


Head  Office,  New  York 


DIRECTORS  CHICAGO   BRANCH: 
PHILIP  D.  ARMOUR.  NORMAN  B.  REAM. 

J.  W.  nOANE,  NORMAN  WILLIAMS, 

Pres.  Merchants  Loan  and  Trust  Co.  Counselor  at  Law- 


BRANCH    office: 

175  La  Salle  Street,  Chicago,  111. 

JOHN  R.  PRUYN,  General  Agent. 


This  Company's  bonds  are  accepted  by  the  United  States  Govcniment  and 
by  leading  Banks,  Railways,  Express,  and  other  corporations,  many  of  which 
guarantee  witli  this  Couiiiany  Ihuir  entire  sl.itl  of  em|)l<)yes. 


Maeshall  M.  Kirkman's  Books  and  Publi- 
cations for  sale  by  Cameron,  Amberg 
&  Company,  73  and  75  Lake  Street 
Chicago,  111. 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 

Los  Angeles 

This  book  is  DUE  on  the  last  date  stamped  below. 


MOV 


Form  L9-25w-9,'47(A5618)444 


iFORNlA 


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K63r-    arid  go-q-errment 
control. 


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